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TRANSNATIONAL DRUG ENTERPRISES (PART II):

U.S. PERSPECTIVES ON THE THREATS TO

GLOBAL STABILITY AND U.S. NATIONAL SECURITY

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL SECURITY

AND FOREIGN AFFAIRS

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

SECOND SESSION

MARCH 3, 2010

Serial No. 111–117

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

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

EDOLPHUS TOWNS, New York, Chairman

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

MARCY KAPTUR, Ohio

ELEANOR HOLMES NORTON, District of

Columbia

PATRICK J. KENNEDY, Rhode Island

DANNY K. DAVIS, Illinois

CHRIS VAN HOLLEN, Maryland

HENRY CUELLAR, Texas

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

PETER WELCH, Vermont

BILL FOSTER, Illinois

JACKIE SPEIER, California

STEVE DRIEHAUS, Ohio

JUDY CHU, California

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

BRIAN P. BILBRAY, California

JIM JORDAN, Ohio

JEFF FLAKE, Arizona

JEFF FORTENBERRY, Nebraska

JASON CHAFFETZ, Utah

AARON SCHOCK, Illinois

BLAINE LUETKEMEYER, Missouri

ANH ‘‘JOSEPH’’ CAO, Louisiana

RON STROMAN, Staff Director

MICHAEL MCCARTHY, Deputy Staff Director

CARLA HULTBERG, Chief Clerk

LARRY BRADY, Minority Staff Director

SUBCOMMITTEE ON NATIONAL SECURITY AND FOREIGN AFFAIRS

JOHN F. TIERNEY, Massachusetts, Chairman

CAROLYN B. MALONEY, New York

PATRICK J. KENNEDY, Rhode Island

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

PETER WELCH, Vermont

BILL FOSTER, Illinois

STEVE DRIEHAUS, Ohio

STEPHEN F. LYNCH, Massachusetts

HENRY CUELLAR, Texas

MIKE QUIGLEY, Illinois

JEFF FLAKE, Arizona

DAN BURTON, Indiana

JOHN L. MICA, Florida

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JEFF FORTENBERRY, Nebraska

BLAINE LUETKEMEYER, Missouri

ANDREW WRIGHT, Staff Director

(III)

C O N T E N T S

Page

Hearing held on March 3, 2010 .............................................................................. 1

Statement of:

Kerlikowske, R. Gil, director, White House Office of National Drug Control Policy; David T. Johnson, Assistant Secretary of State, Bureau

of International Narcotics and Law Enforcement, U.S. State Department; Anthony P. Placido, Assistant Administrator and Chief of Intelligence, Drug Enforcement Administration, U.S. Department of Justice;

Adam J. Szubin, Director, Office of Foreign Assets Control, U.S. Treasury; and William F. Wechsler, Deputy Assistant Secretary of Defense

for Counternarcotics and Global Threats, U.S. Department of Defense .. 11

Johnson, David T. ...................................................................................... 26

Kerlikowske, R. Gil ................................................................................... 11

Placido, Anthony P. ................................................................................... 40

Szubin, Adam J. ........................................................................................ 57

Wechsler, William F. ................................................................................. 73

Letters, statements, etc., submitted for the record by:

Johnson, David T., Assistant Secretary of State, Bureau of International

Narcotics and Law Enforcement, U.S. State Department, prepared

statement of ................................................................................................... 28

Kerlikowske, R. Gil, director, White House Office of National Drug Control Policy, prepared statement of ............................................................... 14

Placido, Anthony P., Assistant Administrator and Chief of Intelligence,

Drug Enforcement Administration, U.S. Department of Justice, prepared statement of ........................................................................................ 42

Szubin, Adam J., Director, Office of Foreign Assets Control, U.S. Treasury, prepared statement of ........................................................................... 59

Tierney, Hon. John F., a Representative in Congress from the State

of Massachusetts, prepared statement of Mr. Bever ................................. 3

Wechsler, William F., Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats, U.S. Department of Defense, prepared

statement of ................................................................................................... 75

(1)

TRANSNATIONAL DRUG ENTERPRISES (PART

II): U.S. PERSPECTIVES ON THE THREATS

TO GLOBAL STABILITY AND U.S. NATIONAL

SECURITY

WEDNESDAY, MARCH 3, 2010

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON NATIONAL SECURITY AND FOREIGN

AFFAIRS,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:06 a.m., in room

2154, Rayburn House Office Building, Hon. John F. Tierney (chairman of the subcommittee) presiding.

Present: Representatives Tierney, Flake, Quigley, Foster, Mica,

Leutkemeyer, Jordan, Welch, and Duncan.

Also present: Representative Chu.

Staff present: Orly Isaacson, LA; Catherine Ribeiro, CD; Robyn

Russell, LA; Andy Wright, staff director; Elliot Gillerman, clerk;

Talia Dubovi and Scott Lindsay, counsels; Steven Gale and LaToya

King, fellows; Aaron Blackberg and Bronwen De Sena, interns;

Adam Fromm, minority chief clerk and Member liaison; Tom Alexander, minority senior counsel; and Christopher Bright, minority

senior professional staff member.

Mr. TIERNEY. Good morning, everybody. A quorum being present

of the Subcommittee on National Security and Foreign Affairs, the

hearing entitled, ‘‘Transnational Drug Enterprises (Part II): U.S.

Government Perspectives on the Threats to Global Stability and

U.S. National Security,’’ will come to order.

I ask unanimous consent that only the chairman and ranking

member of the subcommittee be allowed to make opening statements. Without objection, so ordered.

And I understand that Representative Judy Chu is joining us

today on the subcommittee and would like to welcome her participation. As such I ask unanimous consent that Ms. Chu be allowed

to participate in the hearing in accordance with committee rules.

She will be allowed to question the witnesses after all official members of the subcommittee have had their turn. Without objection,

so ordered.

I ask unanimous consent that the hearing record be kept open

for 5 business days so that all members of the subcommittee be allowed to submit a written statement for the record. Without objection, so ordered.

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And I ask unanimous consent the written testimony from Mr.

James Bever from the U.S. Agency for International Development

be submitted for the record. And without objection, that as well is

so ordered.

[The prepared statement of Mr. Bever follows:]

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Mr. TIERNEY. With that all aside, again good morning and thank

all the witnesses for joining us here today. We are continuing our

oversight on national security and the threats from illicit global

drug enterprises. In October we held our first hearing with a panel

of nongovernment experts who focused on disrupting and dismantling drug operations in Southwest Asia, Latin America, and West

Africa. We heard then about the mounting evidence that the drug

trade is closely tied to international criminal and terrorist organizations and poses a national security threat to the United States.

Today we welcome witnesses from the Drug Enforcement Administration, the Department of Defense, the State Department, and

the Treasury Department to respond to the recommendations that

emerged from our October hearing. We are pleased to have with us

today the White House Director of National Drug Control Policy.

The U.N. Office on Drugs and Crimes estimates that the global proceeds from illicit drugs range from $100 billion to more than $1

trillion per year. That is quite a range. The amount of money garnered by the drug trade puts enormous power in the hands of

criminal actors who have every incentive to disrupt law enforcement, displace legitimate enterprise, and destabilize governments.

The President’s drug control budget request for fiscal year 2011 is now before Congress. It asks for $15.5 billion, of which $6 billion

is slated for international support in interdiction. This includes

funding for efforts to halt drug flows from abroad into the United

States.

One question we should address today is whether this overall

amount is adequate. The second question is whether the amount

targeted to international drug cartels in interdiction is sufficient to

mitigate the national security threats emanating from the expanding global drug trade and associated criminal syndicates.

Our last hearing highlighted a number of policy and strategy

issues. In Afghanistan the ever-changing and increasingly complex

relations between the drug trade, the insurgency, and terrorism

continue to challenge us. Our main counternarcotics initiatives over

the past 9 years, eradication, interdiction, justice reform, and the

promotion of alternative livelihoods, continue to evolve. These programs are supposed to be interwoven with our counterinsurgency

efforts, but a recent Inspector General report questions whether

those efforts are actually integrated.

The witnesses at our October hearing cautioned that no single

counternarcotics approach will work successfully since traffickers

are quick to adapt. They also emphasized that regional, cultural,

and economic differences across the country must be taken into account for any effort to succeed.

The extreme violence we have seen in recent years along the

Mexican border has exposed the tragic consequence of the drug

trade as well as the acute threat these enterprises pose to our own

Nation and to our neighbors. The United States has longstanding

counternarcotics efforts in Latin America, including the multi-year,

multi-billion dollar Plan Colombia and the ongoing Merida Initiative in Mexico and Central America. While eradication has been an

entrenched aspect of U.S. drug control policy in Latin America for

many years, in part because it has been seen as cutting a lot of

drugs at their source, some witnesses told us that the forced crop

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eradication in the absence of real alternative livelihood programs

was a doomed drug control policy.

West Africa is fast becoming a preeminent international drug

hub, and the threats of the region are still not fully understood.

New transit routes where drugs travel from Latin America to West

Africa and then to Europe represent lucrative opportunities for

criminal enterprises. These organizations threaten stability in an

area of the world that is already prone to violence and corruption

and where we are seeing the rise of terrorist organizations such as

al Qaeda in the Islamic Maghreb.

The United Nations Office of Drug Control estimated that close to $2 billion worth of cocaine passed through West Africa in 2007,

which would make cocaine one of the largest exports of that region.

Transnational drug enterprises did not evolve overnight and

have shown remarkable flexibility, alliance building capacity, operational fluidity, and top to bottom organizational sophistication

that many licit businesses would envy. The United States, working

closely with our partners, must break the back of transnational

drug enterprises and sever the drug terror nexus where the monetary proceeds from drug trafficking help fund terrorist organizations such as the FARC in Colombia, the Taliban in Afghanistan,

and al Qaeda in the Islamic Maghreb.

While it is not the focus of our hearing today, I want to note the

importance of addressing the demand for drugs that comes from

within our own borders. Until we are more successful at reducing

demand and taking the profits out of drug trafficking, we will continue to face significant challenges in our international counternarcotics efforts.

With these sobering thoughts in mind, I look forward to hearing

from today’s witnesses, who have been charged by the American

people with the challenging task of dismantling international drug

enterprises, stopping the flow of money to terrorists and criminal

organizations, and protecting our national security.

Mr. Flake, I welcome you to give your opening remarks.

Mr. FLAKE. Thank you, Mr. Chairman. Thank you for calling this

hearing. I appreciate the witnesses coming forward. We have heard

from the private sector nonprofit witnesses before, as mentioned,

and it is good to hear now from every level of government, both

those who are targeting the financial networks like we do at Treasury and those who are looking at other efforts.

I will be interested to see how targeting the heroin trade now

will impact what we are doing with the surge in Afghanistan and

then how those two items intersect, but also to see how your assessment of what our international partners are doing, if this has

been a good year and a good trend or if we need some more help

there.

But anyway, thank you all for coming. I look forward to the hearing.

Mr. TIERNEY. Thank you. The subcommittee will now receive testimony from the panel that is before us today. I will give a brief

introduction of each of you, and then we will start going from left

to right on the testimony.

Mr. Gil Kerlikowske is the White House Director of National

Drug Control Policy, a position he has held since May 2009. In that

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capacity he coordinates Federal drug control programs and oversees implementation of the President’s National Drug Control

Strategy. Prior to this position he served for 9 years as chief of police in Seattle. Mr. Kerlikowske holds a BA and an MA from the

University of South Florida.

Ambassador David Johnson is the Assistant Secretary of State

for International Narcotics and Law Enforcement Affairs. In that

role he coordinates with the President and the Secretary of State

to develop policies to combat crime and international narcotics. A

career Foreign Service Officer, Ambassador Johnson has also previously served as a Deputy Chief of Mission for the U.S. Embassy

in London and as the Afghan Coordinator for the United States. He

holds a BA from Emory University.

Mr. Anthony Placido is an Assistant Administrator and Chief of

Intelligence for the Drug Enforcement Administration. In that capacity he serves as DEA’s senior officer for the U.S. intelligence

community and manages the agency’s Intelligence Division in the

Organized Crime Drug Enforcement Fusion Center. Mr. Placido

has served with the DEA since 1982 in a number of foreign and

domestic posts. He holds a BS from Northeastern University and

an MPA from Golden Gate University.

Mr. Adam Szubin serves as the Director of the Treasury Department’s Office of Foreign Assets Control. In that capacity he is responsible for overseeing the U.S. Government’s economic sanctions

programs which target international narcotics traffickers. He has

held this position since 2006 and has also previously served as a

senior adviser to the Under Secretary of the Treasury for Terrorism

and Financial Intelligence. A former Fulbright scholar, Mr. Szubin

holds a BA from Harvard College and a JD from Harvard Law

School.

Good to see so many Massachusetts educated people.

Mr. William Wechsler is the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats. In that capacity he

oversees the Department of Defense’s Counternarcotics and Threat

Finance Policies and Operations. He has previously served on the

staff of the National Security Council as Director for Transnational

Threats and is Director for Global Issues in Multilateral Affairs.

Mr. Wechsler holds a BA from Cornell University and an MPA

from Columbia University.

I want to thank all of you for making time on your schedules to

join us here today and share your substantial expertise. It is the

policy of this subcommittee to swear you in before you testify today

or have you affirm your obligation to tell the truth. So I ask you

to please raise your right hands and stand.

[Witnesses sworn.]

Mr. TIERNEY. The record will please reflect that all the witnesses

answered in the affirmative. I think you all know that your complete written remarks by agreement are already going to be put in

the hearing record, and I know that they were substantial. We appreciate them and they will be read. But I ask that you try to summarize those remarks in about 5 minutes if you would.

The lights reflect green while you are on the go time, with a

minute to go it will turn to amber, and when your 5 minutes is up

it will turn to red, the floor opens up, you drop down and that is

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it. The Ambassador says, fine with me, I get to get out of here. Not

so lucky. We will try to be as flexible as we can, but we do have

five witnesses. We appreciate you trying to adhere as best you can

to those time guidelines.

Mr. Kerlikowske, we are pleased to hear from you.

STATEMENTS OF R. GIL KERLIKOWSKE, DIRECTOR, WHITE

HOUSE OFFICE OF NATIONAL DRUG CONTROL POLICY;

DAVID T. JOHNSON, ASSISTANT SECRETARY OF STATE, BUREAU OF INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT, U.S. STATE DEPARTMENT; ANTHONY P. PLACIDO, ASSISTANT ADMINISTRATOR AND CHIEF OF INTELLIGENCE,

DRUG ENFORCEMENT ADMINISTRATION, U.S. DEPARTMENT

OF JUSTICE; ADAM J. SZUBIN, DIRECTOR, OFFICE OF FOREIGN ASSETS CONTROL, U.S. TREASURY; AND WILLIAM F.

WECHSLER, DEPUTY ASSISTANT SECRETARY OF DEFENSE

FOR COUNTERNARCOTICS AND GLOBAL THREATS, U.S. DEPARTMENT OF DEFENSE

STATEMENT OF R. GIL KERLIKOWSKE

Mr. KERLIKOWSKE. Thank you for the opportunity to testify on

this important subject of transnational drug enterprises. The

Obama administration believes that a balanced drug control strategy includes comprehensive efforts to reduce our consumption of illicit drugs as well as drug production, trafficking and related violence at home and abroad. Consistent with this view, the President’s fiscal year 2011 national drug control budget proposal seeks

over $2.3 billion to provide support to our international partners

and counternarcotics programs, and that is an increase of $20 million over the levels of the last fiscal year.

Now, although today’s hearing focuses on transnational threats,

it is important to note the administration’s strong commitment to

reducing drug consumption at home. As a long time police chief I

have seen up close the terrible impact that drugs have had on individuals, families and communities. The earlier we can intervene to

get people help, the better, and that is why community-based prevention will be a focus of our efforts.

Drug use and its consequences affect different places in very different ways, and in fact there is no single drug problem in this

country, but a wide variety of drug problems. The drug issues in

each community are closely tied to the makeup, the economy, the

geography, and the culture of particular communities.

We will be expanding and enhancing existing prevention efforts

and working to ensure drug abuse treatment services are made

more widely available. These efforts will include expanded work to

address the abuse of pharmaceutical drugs. That is a problem of

increasing concern within the United States.

Let me turn to the serious transnational threat posed by drugs.

In order to put the thrust of our efforts to combat transnational

drug enterprises in context, it is essential to examine the manner

in which these organizations function. They thrive in an environment of weak governmental institutions, insecurity, corruption, and

limited legitimate economic opportunity, and their purposes are

served by a culture of violence, intimidation, and impunity to creVerDate 11-MAY-2000 13:10 May 09, 2011 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\64920.TXT KATIE PsN: KATIE
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ate the perception that they are the governing body in the areas

that they operate freely.

A clear nexus has been established linking the revenue produced

by illicit trafficking and their violent destabilizing activities. In

light of this, government efforts against the international drug production and trafficking organizations typically include interdiction,

direct organizational attack, and disruption of inputs to the trafficker’s chain of production and distribution.

In Colombia we have witnessed an evolution from what many describe as a nearly failed state during the nineties to today’s situation in which the drug funded terrorist organizations have been reduced in size and power. Additionally, security has returned to

many parts of the Nation and the government is taking an increasing responsibility for implementation of programs formerly dependent on U.S. assistance.

I visited Colombia last September and I observed that it is a

safer place than at any time in the last 20 years. They have also

significantly improved their human rights record over the past 10

years. There are still certainly problems, but this remains a priority for the U.S. Government in working with Colombia. And the

government is stepping up to take on more ownership of the

counterdrug programs, I met with the national police chief there,

from eradication to alternative development to demand reduction.

And in Mexico President Calderon’s government is engaged in, as

we well know, a violent struggle to dismantle major criminal organizations, and at the same time they are working to permanently

reform and strengthen the democratic institutions of government.

The U.S. intelligence sharing, training and the provision of

equipment through the Merida Initiative and other regional programs have been invaluable to our strategic partnership with Mexico, the Caribbean, and the Central American nations. Additionally,

U.S. cooperation with Mexico also includes expanding collaboration

and exchanges on prevention, treatment, and innovative criminal

justice practices.

The most recent example is the U.S.-Mexico Demand Reduction

Bi-National Policy Conference which ONDCP hosted last week here

in Washington, DC, with many Federal partners, including the

State Department. The conference brought together public policy

leaders, researchers, program providers and local coalition organizers from both nations to address the science of addiction, and the

effective prevention, treatment and recovery programs that we

have here in the United States that can be outsourced. The conference concluded with a joint declaration of drug demand reduction cooperation, to include among other things the further implementation of best practices in the fields of prevention and treatment. Similarly, there is much that we can do to address the drug

threats attacking both the United States and Mexico.

In June 2009, Secretary Napolitano, Attorney General Holder,

and I released the National Southwest Border Counternarcotics

Strategy in New Mexico. That strategy is a key component of our

comprehensive national response to the threat along the border.

The response includes cooperation with Mexico through the Merida

Initiative. The Southwest Border Strategy also seeks to leverage information sharing with State and local partners.

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And given the stop sign, I think I will stop here so the floor

doesn’t open up.

[The prepared statement of Mr. Kerlikowske follows:]

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Mr. TIERNEY. Thank you very much. We will try to give you an

opportunity to get where else you want to go in terms of questioning on that.

Ambassador Johnson.

STATEMENT OF DAVID T. JOHNSON

Mr. JOHNSON. Thank you, Mr. Chairman, Ranking Member

Flake, members of the subcommittee, thank you for the opportunity

today to discuss an issue of great concern to me and to my colleagues at the Department of State: transnational drug enterprises

and their associated illicit networks.

Mr. Chairman, I am grateful for your leadership and the awareness that today’s hearing brings to this important national security

issue. We believe that transnational drug enterprises directly

threaten the security interest of the United States as well as the

health and safety of our fellow citizens. These criminal enterprises

actively work to subvert the rule of law wherever they operate.

They undercut democratic institution building and economic

growth in developing countries.

As you noted at the first part of this hearing, the large profits

generated by the drug trade and the efforts to hide and launder

them can distort economies and governing institutions even in developed states. Drug trafficking organizations are at their core

business enterprises often closely linked to other transnational

crime groups and regularly engaged in a broad range of illegal activities that affect American values, business, and our security and

health.

The Department shares this subcommittee’s deep concerns over

links between international drug trafficking and terrorism. As the

international community has clamped down on terrorism and pressured governments from financially supporting terrorist organizations, some groups have resorted to drug trafficking as a source of

revenue. Much of the work my colleagues and I do at the State Department involves foreign assistance and cooperation programs to

isolate, minimize, and neutralize transnational drug enterprises.

Using bilateral, regional and global initiatives and assistance programs, we seek to build the law enforcement capacity of foreign

governments so they can confront these threats before they reach

or impact on U.S. soil.

We help them strike directly at these organizations by disrupting

their operations, arresting and imprisoning their leaders, and seizing their assets. This can include destroying drug crops on the

ground before they can enter the processing chain, particularly in

areas where farmers have viable alternatives, as Mr. Mansfield

pointed out in Part I of this hearing. And in other cases with our

partners at the U.S. Agency for International Development we provide substantial programs to help wean growers away from drug

farming through alternative livelihood and economic development.

Mr. Chairman, countering the power of transnational drug and

crime enterprises requires a global effort. It requires enormous

strategic political, operational and financial coordination and commitment and, most importantly, it requires building and further

developing good and capable governance capacity in the regions

where transnational drug enterprises operate.

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Thank you for your invitation this morning. I look forward to addressing any questions you have, in particular any questions you

might have about the programs and initiatives that my Bureau operates around the world. Thank you, Mr. Chairman.

[The prepared statement of Mr. Johnson follows:]

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Mr. TIERNEY. Thank you, Ambassador.

Mr. Placido.

STATEMENT OF ANTHONY P. PLACIDO

Mr. PLACIDO. Thank you, Mr. Chairman, Ranking Member

Flake, distinguished members of the subcommittee. On behalf of

the men and women of the Drug Enforcement Administration, I

would like to thank you for your continued support, and I will cut

directly to the chase.

Drug trafficking and abuse exacts a significant toll on the American public. More than 31,000 Americans or approximately 10

times the number of people killed on 9/11 die each year as a direct

result of drug abuse. Approximately 7 million people who are addicted to controlled substances squander their productive potential.

Many of these addicts neglect or abuse their children and commit

a variety of crimes under the influence of or in an attempt to obtain illicit drugs. Tens of millions more suffer from this erstwhile

‘‘victimless’’ crime as law abiding citizens are forced to share the

roads with drugged drivers, to clean up toxic waste in clandestine

laboratories, rehabilitate addicts, incarcerate criminals, and put together the pieces of shattered lives.

However, if we want to assess the true cost of this threat we

have to go further and we have to look at the impact that

transnational drug trafficking has on corrupting government institutions, undermining confidence in the rule of law, fueling violence,

undermining regional stability and funding terrorism.

Those who organize, finance, and direct this criminal enterprise

thrive in areas where government control is week. It is no coincidence that the so-called kingpins who run this global trade do not

reside in the United States where they would be most exposed to

our criminal justice system. They operate from locations which they

perceive to be safe havens and they direct the activity of subordinates and surrogates who supply drugs to the United States.

Drug trafficking is a global enterprise that generates a staggering $394 billion a year. This figure dwarfs the proceeds from all

other forms of organized crime. Let me put this number in context.

In aggregate, that $394 billion exceeds the gross domestic product

of many national governments around the globe. Some would argue

that legalization and regulation even at the cost of untold human

suffering and misery would at least strip the proceeds of this economic fund from the market. But both common sense and history

have taught us that those who are displaced from the drug trade

don’t move into corporate life, they morph into other areas of criminality. And what we are really faced with is fighting people who

put personal greed above all else.

Parts of Central America, West Africa and Asia have become havens for criminals who pursue illicit activities largely undeterred

by law enforcement or local government. Drug traffickers use these

regions for the production, transshipment, and storage of illicit

drugs. Violent traffickers are relocating to take advantage of these

permissive environments and importing their own brand of justice,

contributing to further instability.

Unfortunately, areas with limited or poor governance are also the

breeding grounds for other types of criminal activity, to include terVerDate 11-MAY-2000 13:10 May 09, 2011 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\64920.TXT KATIE PsN: KATIE
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rorism. Eighteen of 44 international terrorist groups have been

linked to some aspect of the international drug trade.

Today the FARC is primarily funded through the drug trade. It

sells multi-ton quantities of cocaine and uses the proceeds to purchase weapons for use in the FARC’s decades long fight to topple

the legitimate government of Colombia.

Similarly, insurgents in Afghanistan and terrorists in the Middle

East, Europe and Africa fund their activities through the drug

trade. The DEA has documented hundreds of millions of dollars in

proceeds from drug trafficking flowing to the Taliban.

In Africa international terrorist organizations such as al Qaeda

and the Islamic Maghreb rely on criminal specialists closely linked

to the drug trade for money laundering, document forgery, transportation, security, weapons, corruption, and other criminal activities.

In Europe the Madrid train bombing was funded through the

sale of hashish and Ecstasy. And DEA investigations have disclosed significant linkages between Hezbollah and the drug trade

in Africa, the Middle East, and Latin America.

However, these transnational threats do not have to involve insurgency or terrorism to warrant our concern. In spite of President

Calderon’s extraordinary steps to deploy more than 45,000 military

troops to assist the police in combating cartel influence, there have

still been more than 18,000 murders, drug-related murders, in the

last 3 years. More troubling is the fact that many of these murders

were intentionally committed to try and intimidate the public and

influence the government to stop its activities.

From the war on terrorism to our southwest border transnational

drug trafficking threatens the security of Americans at home and

abroad. In Afghanistan, U.S. soldiers are fighting an insurgency

that is substantially funded by the drug trade. In our own hemisphere ever increasing rates of violence threaten the security of our

borders and those of our neighbors.

Let me conclude by saying that the consequences of drug trafficking have never been higher. We must continue our efforts to mitigate this damage or we will certainly pay a higher price later on.

Thank you.

[The prepared statement of Mr. Placido follows:]

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Mr. TIERNEY. Thank you, Mr. Placido.

Mr. Szubin.

STATEMENT OF ADAM J. SZUBIN

Mr. SZUBIN. Thank you, Chairman Tierney, Ranking Member

Flake, members of the committee. Thank you for the opportunity

to appear before you today to discuss the role played by the Treasury Department in combating the threat posed by transnational

drug enterprises. We work alongside the agencies represented here

and many others in our government to add financial expertise and

our unique authorities to our collective counternarcotics efforts,

and financial sanctions can be a powerful tool.

Top level Colombian traffickers have told us that they fear three

things above all else: The first, arrest and extradition to the United

States; second, seizure of their assets; and three, being placed on

the OFAC sanctions list.

There is a heightened awareness of sanctions among the drug

trafficking community and a fear of their consequences. Individuals

and entities designated by OFAC lost access to the U.S. financial

system. And U.S. persons, whether they be here or abroad, are forbidden from doing business with them. Any of their assets are immediately frozen if they are or come within possession of a U.S.

person or financial institution.

And while these direct legal consequences can be highly disruptive, the informal ripple effects of our designations go much farther. In practicing their own due diligence and risk avoidance,

many foreign, non-U.S. banks will immediately close the accounts

and deny service to anyone who is placed on the OFAC list. Foreign

companies that have no legal obligation to comply with U.S. sanctions will likewise often refuse to do business with designated parties, thereby further isolating them from legitimate commercial

markets.

This type of reaction is now common in Colombia, and we are beginning to see the same type of isolating impact played out in Mexico.

Treasury has been targeting international drug enterprises for

15 years. In 1995, President Clinton signed Executive Order 12978

which targets Colombian drug traffickers and organizations. In

1999, Congress globalized the concept enacting the Foreign Narcotics Kingpin Designation Nation Act, or the Kingpin Act, which has

allowed us to act against the network of cartels worldwide. Since

1999, the President has identified 82 Tier I kingpins and OFAC

has identified over 500 individuals and companies that make up

their support and financial networks.

Just yesterday we designated two of Colombia’s most wanted

drug lords; Daniel Barrera Barrera, known as ‘‘El Loco’’ Barrera,

and Pedro Oliviero Guerrero Castillo, a/k/a ‘‘Cuchillo.’’ These

druglords operate primarily in eastern Colombia and are closely

aligned with the FARC, whose criminal and destabilizing activities

were highlighted by Mr. Placido.

In a good example of OFAC’s network approach, at the same

time yesterday we also named and targeted the assets of 29 individuals and 47 companies in these druglords’ distribution, money

laundering, and money concealment networks.

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Cooperation with host governments is vital to our work. These

are transnational threats, and they warrant a transnational approach. A good example are our collective actions against the

Amezcua Contreras organization. In October 2008 we designated a

company named Collins Pharmaceuticals and its associated officials. The company had manufactured pseudoephedrine and diverted it to drug trafficking organizations for the production of

methamphetamine. As a result of this action nearly $3 million was

immediately blocked in U.S. bank accounts.

But following our action, Mexico’s Attorney General’s office

blocked bank accounts in Mexico belonging to the same individuals

and entities that we had listed.

In September 2009, we followed up again on the action and designated additional individuals and front companies who had been

working to circumvent the earlier sanctions. Of course we have also

intensified our efforts greatly against narcotics traffickers in Afghanistan and Pakistan to support the efforts alluded to earlier by

others on this panel. Treasury is actively supporting those efforts

to disrupt and dismantle the narcotics networks in those countries

using the same approaches that have yielded results elsewhere.

In sum, economic sanctions can be a highly effective tool which

when used in concert with United States and foreign law enforcement authorities can advance U.S. efforts to combat these dangerous transnational drug efforts.

Thank you for your invitation and for your interest in this important matter.

[The prepared statement of Mr. Szubin follows:]

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Mr. TIERNEY. Thank you Mr. Szubin.

Mr. Wechsler.

STATEMENT OF WILLIAM F. WECHSLER

Mr. WECHSLER. Thank you very much. Mr. Chairman, Ranking

Member Flake, distinguished members of the committee, thank you

for the opportunity to testify here. And it is particularly appropriate that you invite me to testify with all my interagency colleagues because this panel represents the whole of government approach to this issue that we find vitally important.

We have all seen the disruptive effect of illegal trafficking. Unfortunately, looking back over time, most governments around the

world, including ours, have historically compartmentalized these

threats into categories that fit our bureaucratic organizations.

There are national security threats, there are intelligence threats,

there are law enforcement threats, there are health concerns, there

are commerce concerns, there are education concerns. As a result,

again, historically, each bureaucratic arm addressed the threat according to its respective organization’s perspective without as much

crosscutting organization and integration as to maximize our effectiveness. The predictable result in those instances has been lack of

uniformity and marginal results. Where we have had on interagency, coordinated approach we have had quite powerful results.

Under the Obama administration the United States is attempting to address these shortcomings by providing a whole of government approach designed to dismantle bureaucratic barriers that

have long prevented a centralized method of attacking these

threats to global stability and U.S. national security.

As my colleagues have described, in some parts of the world broken communities become breeding grounds for criminal activities of

all kind, including all types of illicit trafficking: drugs, weapons,

people, cash. Lawless environments make inviting sanctuaries for

religious zealots, political ideologues, insurgents, and terrorists, all

sharing a common proclivity for violence and destruction. Such

groups seek to evade or neutralize the forces of order. Their common needs allow them to cohabit in an environment where the government is weak and the populace can be controlled by bribes, intimidation, violence, and corruption. All types of organizations expand power bases and corrupt and control more communities. They

become more formidable. Eventually criminal and extremist organizations may be able to carve out safe havens in parts of the world

and at times they become direct threats to U.S. national security

in which the Department of Defense has to become involved directly. A coordinated interagency response is critical to defeating

the threats posed by these transnational drug enterprises.

My office’s principal role is to provide counternarcotics support to

domestic law enforcement agencies and foreign security forces conducting counternarcotics missions. The Department has also concluded from experience, quite often painful experience, that the

kinds of enemies that we are fighting on the battlefield today and

the kinds of enemies that we expect to fight on the battlefield in

the years to come are going to be financed, supported, and organized in part by transnational illicit networks and especially drug

networks.

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Therefore, we in the Department of Defense have to reach out to

our interagency colleagues who have much more experience, expertise and particular authorities in dealing with these threats in

order to integrate them into our military efforts to make our efforts

as successful as possible.

In addition to these kinds of support that we provided in the

past, the Department of Defense is trying to increase its supporting

role in addressing threat finance more generally. Terrorists and insurgents typically rely on irregular ways to fund their activities, including crime, donation from nongovernmental organizations, using

front companies, and various black market activities that Adam

talked about. Only recently we have developed all the weaponry

that we need to really attack these financial networks, and we cannot overemphasize enough that a successful effort in this nature

will be accomplished only with an interagency whole of government

approach. It is critical for us, for our way of thinking, of addressing

the asymmetric warfare that we are confronting today and we expect to confront in the future.

Chairman, ranking member, thank you again for the opportunity

to discuss this issue. I look forward to answering all the committee’s questions.

[The prepared statement of Mr. Wechsler follows:]

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Mr. TIERNEY. Thank you, Mr. Wechsler. Thank all of you for your

testimony.

This is a perplexing area, to say the least. I know your jobs are

challenging. We appreciate what you do.

Mr. Kerlikowske, let me start with sort of a procedural question

here. I understand you don’t yet have in place all the key staff you

need. What expectations do you have on staffing up and where is

the status of that?

Mr. KERLIKOWSKE. We are working very hard at getting the people on board. One of the concerns has been the Deputy Director.

One of the Deputy Directors was voted out in November and is still

awaiting confirmation.

Mr. TIERNEY. He is out of committee and waiting full Senate confirmation?

Mr. KERLIKOWSKE. That is exactly right, Mr. Chairman. So I

think it is difficult sometimes to get the job done if you don’t have

all the folks in place.

Mr. TIERNEY. Perhaps we can engage our colleagues here and

maybe we will be able to communicate with the Senate our desire

at least that this office get staffed up and that you have the tools

that you need to move forward on that. I am sort of always struck

by this idea that this all is driven by money, at least it seems to

all have been driven by money and therefore the power and everything else on that basis, and I wonder of all the different methods

that we have to address that, which ones are really, really effective

or are we just chasing our tails on some of this stuff. I can imagine

the frustration of the DEA fighting the same fight over and over

again every day and it seems to pop up somewhere else.

So I want to ask each of you a question and answer it if you can.

We have the drugs obviously, so you can go after the drugs, interdiction on that, you can go after the money on that, you can go

after the precursors if you can so that they can’t make the drugs

in the end, or you can sort of attack the one thing that we have

some control over, I guess, in this country, which is the end user,

and try to diminish that. Of those, if I have missed something

please tell me that, but of all those ideas which do you think is the

more effective, just so I can get something from each of you.

Mr. KERLIKOWSKE. The money. I think choking off the money has

not been as much of a whole of government approach as you are

seeing here today. I also don’t think that when it comes to seizing

those assets that State and local law enforcement, and I spent the

vast majority of my career at the local level, I don’t think that they

have been as engaged in working with Federal partners on choking

off money.

We have all seen the press conferences with the arrests and the

people in handcuffs, we have seen the seizures of guns and drugs

laid out on the table. It is not that exciting to seize a bank account.

And I think that if we really concentrate the way it has been expressed here I think that we will have a better opportunity to

choke off money and in turn that is the life blood of these cartels.

Mr. TIERNEY. Ambassador Johnson.

Mr. JOHNSON. I think that the monetary driver of this is something you always have to keep your eye on. It is the reason these

people get up in the morning. They are not interested in trading

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cocaine for its own sake. But I think it is important to peel back

a little bit and figure out how you go about that. And from my

point of view, and this is, I guess this is because of what I do for

a living, but helping foreign governments build the institutions of

governance is the long run, durable answer to this problem, and

that gets at the money as part of that. Getting at the money is a

first level, is a rifle shot and it has to be followed up and followed

up and followed up. But helping build those institutions with our

foreign partners gives people in the DEA and the Treasury and

other places in our government partners to work with.

And it goes back to the main problem here, and that is that

ungoverned space will bite you. And whether it is ungoverned

space in a remote part of the world or it is ungoverned space in

a neighborhood, in a close-by country, that is I think where the key

is to dealing with this problem, and it goes directly to that question

of how do you make money on the street.

Mr. TIERNEY. Mr. Placido.

Mr. PLACIDO. Thank you, Mr. Chairman, for the question. I

would just say that I have spent the better part of my 31 years in

this profession wrestling with the question that you have asked

and I have come to the conclusion that there is no silver bullet,

there is no one tool that will eliminate this problem, but rather

many. What I will say is a matter of personal preference, and my

organization of the Drug Enforcement Administration has come to

the conclusion that the notion that we have a war on drugs suggests that we are fighting against the contraband itself and we

don’t believe that is true. We are really fighting against organizations and it is an organizational attack strategy designed to go

after the people and the greed of those who put personal profit

above all else. And I believe you heard Mr. Szubin and others talk

about the things that these traffickers fear most is really their own

well-being. Certainly they are concerned about their money, and

the profit is the reason that they get involved in the business. But

it is actually taking these people out of circulation where their

money can’t buy corruption, can’t help them where they can’t benefit from that and actually incarcerating these people for long periods of time, I think that is the reason why the so-called kingpins,

or as we now call them, the consolidated priority organization parties, don’t reside here within the confines of the United States. We

do a pretty fine job of motivating people to stay out of our jurisdiction.

That is not true around the world, and that is why we have to

build these partnerships around the globe as they are looking for

safe havens and refuge.

Mr. TIERNEY. Mr. Szubin, if you can quickly.

Mr. SZUBIN. It won’t come as a surprise for us that the focus is

money.

Mr. TIERNEY. I knew what everybody’s focus was. I think people

have been pretty good about stepping outside of that to find something else that was effective.

Mr. SZUBIN. I think the effectiveness can be really significant for

all the reasons mentioned. And when we are talking about the

money of these traffickers it is not just the bulk cash smuggling

that people often picture that is secreted in a compartment in a

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truck heading down to Mexico. It is what are these narcotics organizations doing with the money, doing with their profits. They are

not putting it under their mattresses. They are investing it in often

appearing seemingly legitimate businesses. And they will develop

networks of companies, whether or not they are companies that

they use directly in their trafficking enterprises. We have just this

week designated a trucking company that was affiliated with a

narcotics organization. Well, a trucking company is very useful;

small aircraft companies are very useful. But more broadly, retail

operations are very useful. If you have a pharmaceutical company

you have an excuse for coming into banks with large sacks of cash

because you have customers coming in and you have receipts. So

we see them putting the money in these accounts in these companies to launder it, to conceal it. And when we talk about going after

the money we are talking about going after their treasure houses,

going after their bank accounts, their financial holdings abroad.

And I think the impact there can be palpable. And not just the impact on the worst of the traffickers but the deterrent impact on

those who otherwise might have said, I will go into business with

you, I will agree to serve as a corporate officer. We try to name all

of those people who are found on the Dun & Bradstreet sheets for

these companies, and we see them then coming to us and saying,

I want off the list, I won’t have anything to do with, you fill in the

blank, drug organization, just take me off your list. And so it is a

behavior changing tool as well.

Mr. TIERNEY. Thank you.

Mr. Wechsler.

Mr. WECHSLER. I would echo in many ways what Tony has said,

that rather than looking for one the critical element that is too

often missing is the integration of all of these efforts. And I would

suggest as one place to look for a successful effort to date, although

not final, is in Colombia. There in the late 1990’s the Colombian

people when polled, two-thirds of them believed that it was very

likely that the FARC was going to take Bogota and take over the

whole country. Now the FARC controls only a sliver of territory

and is a shadow of what it was. There are so many problems there,

we don’t want to discount them. But taking a long range multi-year

approach, bringing in all the lines of operation, the financial operation, the law enforcement operation, the capacity building operation to foreign countries, the military and Special Forces operation, the intelligence operations and integrating it as a whole

under the leadership of strong local leadership as we had in Colombia is what can succeed and can really change the game.

Mr. TIERNEY. Thank you.

Mr. Flake, take 8.

Mr. FLAKE. Thank you. I have enjoyed this testimony. It is been

very enlightening. Mr. Szubin, you have mentioned the importance

of having agreement with host countries while we are trying to target some of this illicit action.

Can you talk a little about third countries, particularly in Europe, with the banking system? A lot of this money as you said isn’t

put under mattresses, it moves throughout the system. How has

the cooperation been with our European allies, for example, with

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regard to movement of money to South America or Middle East or

elsewhere through Europe?

Mr. SZUBIN. I would say it has been very good in our area, and

I would certainly leave it to Ambassador Johnson and others to

talk more broadly. But when it comes to isolating named kingpins

and their networks, the Europeans are extremely supportive of our

efforts. And the European banks are, even without the cooperation

of their governments, large reputable banks in Europe do not want

to be doing any business with somebody who ends up on the wrong

side of a kingpin listing. And it is a very powerful, reinforcing impact because it means what is technically, perhaps legally a unilateral sanction under the congressionally enacted Kingpin Act ends

up spilling out in terms of its effect across the globe.

Mr. FLAKE. Thank you.

Now, Mr. Szubin is too much of a diplomat to say this but I will.

I think part of the issue, you mentioned that, Mr. Kerlikowske

mentioned that in the past maybe a weaker link has been the

money side, and part of the issue we have had is the wide portfolio

that OFAC, the Office of Foreign Assets Control, has had. Few people outside of government realize that OFAC administers the travel

ban we have on Cuba. And in the past I think far too much time

and resources has had to be devoted, not their choice, it is

Congress’s edict, to issuing travel licenses for individuals to travel

to Cuba and looking at that angle. And I think that has the effect

of diverting too much attention from the real matters that matter

right now, and that is to intercept these money transfers.

I have worked with Mr. Szubin before and I know that they have

the right priorities and they are doing well and focusing more partly because some of those restrictions on travel have been lifted and

it perhaps has made it easier and less of a drain on that office. But

I want to commend you for how you are handling that. And also

I want to appeal to my colleagues to change it and free up OFAC

to do what it needs to do with more of their time and resources.

Did you have a comment on that?

Mr. JOHNSON. I just wanted to say that European governments

have been very careful in trying to work with us on this issue.

They probably exercise more care than sometimes we would like to

make sure that they don’t get a bad precedent set which would tie

their hands. But the issue that Adam raised about the banking institutions themselves I think has been probably the most important

and the most effective, and that is the banking institutions, particularly those that hang up signs that you see, are extremely concerned about their own reputational risk. And bringing things to

their attention about what those risks are and helping them with

their compliance programs has been an extraordinarily effective

tool that Treasury has worked very hard with the Europeans.

Mr. FLAKE. It sounds as if the contacts are made with the banks

themselves as opposed to the governments in which these banks

are located.

Mr. JOHNSON. It is both. But I think that it has been more creative, if you will, on the reputational side, and this is a new tool.

And I compliment Treasury because they have really worked this

issue hard.

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Mr. FLAKE. That is good to hear, that is good to hear. Mr.

Kerlikowske, the Southwest Border Initiative you mentioned earlier, the announcement, how is that going to change what is going

on from the Southwest border. Those of us from Arizona are particularly interested in this.

Mr. KERLIKOWSKE. I have been to the Southwest border now

three times. Over my career my colleagues in the major cities all

along those States have oftentimes in our meetings reflected upon

the real problems that they have been facing. I think there are a

couple of important changes with the Southwest Border Initiative.

One is that there has been a very active involvement of State and

locals that I don’t think had been brought into the fold as much

before. There was concern in the past that, look, we are already

pretty busy in these sheriff’s departments with literally thousands

of square miles, as you know, and not an awful lot of deputies. But

they have really stepped up to the plate. They really understand

that partnering with the Federal Government is important.

The second thing that I think is important is this new initiative

and focus on guns going south and cash or the assets or proceeds

going south. And so the government of Mexico making those

choices to inspect cars coming into the country, which had really

not been done in the past, those things are important. So I see the

continuing cooperation and work of everybody coming together having perhaps some significant effects in the course of this year.

Mr. FLAKE. Thank you.

Mr. FOSTER [presiding]. Thank you. And now I will recognize myself for 5 minutes.

Director Szubin first. Which countries currently provide safe

haven for the drug traffickers’ finances? Is there a short list of

countries that are most prominent?

Mr. SZUBIN. No, I don’t think we find that there are countries

that are affirmatively stepping up to operate as safe havens. Certainly there are areas that are less well regulated. And where the

banking sector, the financial industry writ large, is less aware of

the types of risk factors that I was talking about earlier that have

become so central to banks in Latin America. And our efforts alongside State, alongside all of our colleagues, are of course to raise the

tide for all boats and to try to see the kind of careful compliance

efforts by banks around the world and to see governments also

doing more across the board.

When they improve their anti-money laundering practices, that

helps in terms of the narcotics effort. When they improve sanctions

implementation efforts, that helps. You know, narcotics is touching

on so many different areas that our technical assistance activities,

our capacity building activities that have been flagged so well by

Director Kerlikowske and Ambassador Johnson are helping us

throughout the world.

Mr. FOSTER. And how connected is this to the efforts to get at

bank secrecy laws used for tax evasion? Are these very similar efforts or are these really disjoined?

Mr. SZUBIN. I would say they are separate, and people tend to

make a distinction in foreign discussions between tax issues and

counternarcotics or other sort of mainstream criminal organization

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issues, and so I see them as separate. But I would certainly defer

to my colleagues to comment.

Mr. JOHNSON. I think they are separate. Obviously some of the

capacity building about bank regulation can have an impact on

both issues. But on tax regulation we are looking more at what our

own citizens are doing. And in the money laundering we are tending to focus on what others are doing. And those tend to involve

as much domestic transactions as they do international transactions.

Mr. FOSTER. And are there additional legislative tools or international agreements that you really need to make these financial

pressures on the drug cartels more effective?

Mr. SZUBIN. The main tool we use, as I noted, is the Kingpin Act,

and it is a very powerful authority that Congress gave the administration back in 1999. It allows the President to name what we refer

to as Tier I kingpins, whether an organization or a major trafficker.

And then it falls on us in the Treasury to followup. And when I

say us in the Treasury, I am not really speaking about a single

agency effort by any means, because it is the intelligence, the law

enforcement information from our colleagues at this table that are

the fuel for these actions.

But what we ideally do is go after the companies, the front companies, shell companies, money laundering vehicles, the accountants, the lawyers that are propping up these networks and that are

allowing them to launder and to conceal their funds and ideally put

them out of commission.

Now, I don’t want to give you the mistaken impression that every

time we take a sanction action it means the company closes down.

There are times when we have to keep at it for years and employ

diplomatic efforts and persuasion to try to bring foreign law enforcement to bear, whether that is in a seizure, a forfeiture, or pulling the company’s registration altogether. But sometimes the coordination works so well that the effects really are immediate.

Mr. FOSTER. So you think it is a fair statement that you are limited by your manpower and foreign cooperation at this point rather

than your legislative authority.

Mr. SZUBIN. I don’t view the legislative authority as holding us

back in any way.

Mr. FOSTER. I guess a question just for anyone who wants to

field it. Has there ever been any attempt at a sort of unified economic analysis to see where we should put our money to get the

most bang for the buck, you know, just to try to figure out some

sort of metrics for how to minimize the economic damage caused

by drugs in the United States and the indirect cost to our military

and just some sort of bottom line and say, OK, given that where

do we put our resources? You know, you could put them anywhere

from bribing Afghan farmers to grow something else to try to, you

know, better enforcement on the streets and cities in the United

States and anywhere in between.

Has there ever been any group that just tried to look at the

whole, the economics of the whole thing and identify the best return on investment?

Mr. KERLIKOWSKE. It depends on which group I am talking to.

It is been interesting, but an area that actually you left out, the

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prevention programs, are critically important. If we reduce our demand here in the United States, if these other countries, and I just

came back from Russia, I have heard from every country now that

I have visited of their growing addict populations, it is a significant

drain on dollars. A small amount of investment and prevention, we

know that treatment is about half the cost of incarceration and

that treatment can in fact be effective. None of this means that we

are reducing the power of law enforcement or the importance of

law enforcement. And in fact oftentimes people go into treatment

with handcuffs on. So I think that might be important.

When it comes to the other areas that you have talked about, it

has often been said that if our goal in eradication is to reduce the

amount of drugs coming into the United States, it would be analogous to reducing the number of diamonds by removing the lumps

of coal. There are a lot of good reasons for various eradication programs, a number of good reasons for it. But if you really look at

how it is going to reduce the amount of drugs that are in the

United States, that is probably at the lowest end of that tier.

Mr. FOSTER. Thank you. I guess my time has expired, and so now

I will recognize Representative Mica.

Mr. MICA. Thank you. And I am glad that we are conducting this

hearing. I had the privilege of chairing this subcommittee or its

predecessor back in 1998 to 2000, and I think responsibility for

oversight is extremely important. I am dismayed, however, at the

systematic dismantling, and we heard we are not even supposed to

talk about a war on drugs. When this administration comes in and

takes your position, Mr. Kerlikowske, takes it out of the Cabinet

to me lessens its importance, of, visibility. Some of the efforts to

promote legalization may be well intended, but they do have consequences. And some of the reduced enforcement, all of this will

end up with more young people, in particular, who look to role

models and also look to leadership, believe it or not, and the direction from the highest office of the United States toward their attitudes of drug use and drug abuse. So I think we are headed downhill.

I saw some statistics the other day I thought were disturbing.

With crime down generally across the country, we still have young

people addicted. And was it Mr. Placido, who gave the statistic,

31,000 deaths? It is by far the worst social and criminal problem

that we have in the United States.

The other thing, too, is you are talking about putting resources

and what is most effective on the international scene, and that is

important. I want to talk about that. But aren’t most of the drugs

still coming into the United States from the Caribbean and South

America through the Southwest border and Florida? Is that right,

Mr. Kerlikowske, Mr. Placido? Is that right, Mr. Placido?

Mr. PLACIDO. Particularly with cocaine we estimate now, the

interagency estimates about 91 percent of the cocaine crosses the

Southwest border, significant amounts of meth and marijuana.

Mr. MICA. I was down in San Juan and got a briefing by the

Coast Guard and they showed me the charts of the drugs coming

out of South America. They traced the planes coming out. There

were solid red lines coming still out of there. So it is coming into

Florida, some of it was going up to Mexico and then transiting in.

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Were you consulted, Mr. Kerlikowske, or anyone else here when

the administration proposed to cut the Coast Guard positions by

1,100, to mothball five recently upgraded helicopters, reducing the

Coast Guard’s antidrug operations in Florida, where I just happen

to live? And the Caribbean, which we just cited, was the main

source of these people bringing this crap in. That would dramatically reduce our Nation’s capability. Were you consulted on these

cuts?

Mr. KERLIKOWSKE. No.

Mr. MICA. Were you consulted, anyone on the panel?

OK. I was appalled. I am going to the budget hearing in a few

hearings and speak about that. I have gone to the Coast Guard

hearing. And actually both sides of the aisle were just stunned at

the administration’s proposal.

Furthermore, in the same budget to cut border protection fencing

technology and infrastructure by more than—well, it is almost a

quarter of a billion dollars, $225 million. Were you consulted Mr.

Kerlikowske, the Drug Czar, on this?

Mr. KERLIKOWSKE. I wasn’t consulted on the fencing, but I do

know there are significant concerns about how effective that program has been.

Mr. MICA. Well, again, our job is to take the resources and make

them effective, and I am looking for that. I am not here just to

criticize you. We want this to be successful. Those kids are dying

in our streets. I can tell you the names of parents I have talked

to in the last year that have lost their kid with drug overdoses and

drug abuse.

Ambassador Johnson, most of the heroin that is produced in Afghanistan, I haven’t been up to the border in a long time, but it

used to go to Europe. Is still about 90 some percent going to Europe of that heroin?

Mr. JOHNSON. I don’t think 90 percent goes.

Mr. MICA. OK. How much?

Mr. JOHNSON. Almost none of it comes to the United States.

Mr. MICA. All right. That was my point. You said in your statement, I took it down, requires a global effort. Now, I don’t think

the United States, and I used to be involved in these panels, in legislative panels, and you guys listen here, the new Members here

who haven’t been around. We need to get some of our folks into

these discussions again, legislative people who set the policy, and

get with the commissioners, get with the European Union and others because they do have clout. And if we talk to them Member to

Member, interparliamentary discussions to get the EU to do more,

that crap is coming into Europe and they are suffering. How much

are they doing as far as programs in Afghanistan, what share are

they doing now?

Mr. JOHNSON. The Europeans are contributing significantly to

the ISAF forces, notwithstanding the——

Mr. MICA. For the drugs, crop substitutions, others.

Mr. JOHNSON. Yes, particularly the European Union Commission

and the British Government.

Mr. MICA. I can tell you whatever they are doing is peanuts compared to what the United States is doing. They have lost personnel,

too, and we have lost personnel. But they have a distinct interest

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in stopping this heroin. And I used to go to those meetings, and

we would sit there and the Europeans would pooh-pooh us about

cocaine. We did such a good job, up until most recently, of stopping

that cocaine from getting into the United States and the price

down here that it is being diverted to Europe because it gets more

dollars, right, and now they are transiting they have a cocaine

problem from South America in Europe.

But we need to get more engaged as a subcommittee and committee, and you guys need to get over there. And I know this is an

election year. Talk to these parliamentarians who make that policy

and get them engaged, not only for their benefit and stop this stuff,

but also for our benefit.

I thank you for letting me go over my time. I have additional

questions to submit to the record.

Mr. FOSTER. Representative Quigley is the next in subcommittee

seniority.

Mr. QUIGLEY. Thank you, Mr. Chairman.

Mr. Kerlikowske, just taking this a slightly different way, we

have been told by many, including the Secretary of State, that 90

percent of the weapons, including assault weapons that are used in

these drug wars that take place, are coming from the United

States.

Your thoughts on reextending the assault weapon ban as it relates to these weapons?

Mr. KERLIKOWSKE. No. I have been on the record as a police chief

for a number of years along with many, many, many of my colleagues on the assault weapons ban. There were a number of

issues surrounding that, how effective it was. I would tell you that

right now that the assault weapons ban issue has not even been

something that I have considered only because of the amount of

time that I have been devoting on the drug issue.

But I will tell you this: that I think with the ATF’s implementation of electronic tracing data that has now been put into Mexico

in a Spanish version, we will know with much more certainty the

number of guns being seized in Mexico and where they actually

came from, whether it was Guatemala, Honduras, or whether it

was the United States. And I think that information will in fact

then impact future discussion.

Mr. QUIGLEY. It will do that?

Mr.KERLIKOWSKE. I think that information about where the guns

are coming from that are being seized in Mexico and are being used

to kill prosecutors, judges, and others, I think the information

about where those guns come from will be helpful to any administration.

Mr. QUIGLEY. Let’s just say that it allows us to determine that

70 or 80 or 90 percent of the assault weapons are coming from the

United States, that they are purchased through straw purchasers

or whatever. I know that is valuable information, but I have a pretty good hunch that is the ballpark number now, and doesn’t it

make sense to go forward more strongly and reinstate the assault

weapon ban?

I don’t know that it gives anybody comfort whose lost family

members through assault weapons that we know where they came

from.

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Mr. KERLIKOWSKE. I think it makes sense to take that information as an administration and to very carefully review it and consider also the problems that have existed in the past around the

assault weapons ban. Other than that, there are a number of other

agencies and Secretaries that have a vested interest in this issue,

also, and I would probably defer some of those comments to them.

Mr. QUIGLEY. I have asked just about everybody who has come

before this committee the same question. But for the time allowed,

if anyone else on the panel would like to provide their insight on

that thought.

Mr. PLACIDO. Thank you, Mr. Quigley. I just have one comment.

That is that this committee may be pleased to hear that through

the use of the asset forfeiture fund; that is, moneys that have been

seized from the drug traffickers themselves, we have rolled out a

picket line of license plate readers in general proximity to the

Southwest border to inspect vehicles southbound into Mexico looking for bulk cash and firearms, and I believe that we are having

some success, at the early stages now, but in actually stopping

those firearms from reaching Mexico in the first place.

Mr. QUIGLEY. I appreciate that but you realize you are not going

to catch them all, right?

Mr. PLACIDO. That is right.

Mr. QUIGLEY. And having a greater source or greater volume of

weapons purchased initially legally makes it tougher to stop all of

them. There is a bigger pool coming into the country of Mexico,

therefore putting more innocent people, including Americans involved in this war, at risk?

Mr. PLACIDO. Yes, sir.

Mr. QUIGLEY. Thank you.

Mr. FOSTER. And we will now recognize Representative

Luetkemeyer for 5 minutes.

Mr. LUETKEMEYER. Mr. Wechsler, I am very familiar with the

program that we have, the National Guard troops over in Afghanistan trying to teach the Afghan farmers how to produce other crops

so that they will no longer produce poppies, which we get heroin

from. How successful do you believe that program to be?

Mr. WECHSLER. That program, which is quite important, is integrated into a number of other programs for alternative crop development. The Secretary of Agriculture has personally gone out there

to give his advice and guidance.

It is, from the Department of Defense’s recent experience at

least, the first time that we are integrating the Department of Agriculture into our war efforts. It is critical that we do so.

One that I would call your attention to is that not too long ago,

in the 1970’s, the area of Afghanistan that we are talking about

was not a massive source of drugs. It was a massive source of regular agricultural produce that was part of the global market and

made its way to market, and people had healthy, vibrant communities based on that.

The efforts that we are doing there are to do crop substitution

and alternative development. Efforts are not going to succeed overnight. In fact, they are going to take quite a long time, given how

much damage has been done, and they are integrated into our

wider COIN efforts to do so.

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But it at least gives some degree of comfort to note that there

was a time not in the too distant past where that provides a vision

of where we might be going again.

Mr. LUETKEMEYER. I come from Missouri. Our National Guard

group was the first one to go over there, and we have our group

over there for the third tour. And meeting with Colonel Lepper last

week with regards to his oversight with regards to the program, it

has been, in my view, pretty successful. And I think it is probably,

as you indicated, it is probably an integral part of any sort of ability of us to transform that country and cutoff the flow of drug

money. If they don’t produce the agricultural crop from which they

derive the drug, it is going to be more difficult for the Taliban to

fund themselves.

So as a result of the success of the program, are you thinking

about promoting it somewhere else in the world, or is this the pilot

project and the verdict still yet to be determined?

Mr. WECHSLER. We still have a lot of work to do in Afghanistan,

and again, this work is going to take place over a number of years.

And it is not, of course, going to be just a military activity but a

wider whole-of-government activity to do so because once we take

the territory we have to hold the territory and build the territory.

And building the territory means a lot of things, and one of the

things it means is bringing this territory back into an economic

zone where they can feed themselves and meet their own needs

without having to rely on the drug trade.

And it is also important to note for the individual farmer, there

are a number of crops that provide a lot more in the way of money

and value to that farmer that are completely legal than opium. We

just need to build the infrastructure around and build the security

structure around that so they can make the logical financial decision to move in that direction. Right now they are not in that position, too many of them.

Mr. LUETKEMEYER. I realize it is a long-term process, but it is

a huge step in the right direction. If you transform the economy,

you can earn the trust of the people. If you can earn the trust of

the people, you can root out the Taliban, and I think that is where

we are headed. And I think from my discussions and my knowledge

of the programs, it seems to be working very, very well.

Mr. Placido, with regards to threats around the world, what do

you feel right now is the most significant threat or what you feel

is the rising threat from whatever area, whatever country that is

sort of top of mind, ones we really need to focus in on?

Mr. PLACIDO. I think it is very difficult to put them in a rank

order because we are not comparing apples to apples. My personal

opinion—and I think where this administration has been—is to

really focus on Mexico, which is the arrival zone for three of the

major four drugs that are abused in the United States and because

of its geographic proximity to the United States. While we are concerned about lawlessness across the globe, be it West Africa or Afghanistan, there is a certain urgency that is felt when there is instability to our immediate south. And so I think that this administration and my agency have spent a lot of time focusing on Mexico,

and I think that is appropriate.

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Mr. LUETKEMEYER. Mr. Kerlikowske, what do you think about

that?

Mr. KERLIKOWSKE. When I look at the 2,000-mile border and the

level of violence, I would say that Mexico is very clearly one where

we should concentrate time, effort and resources. General McCaffrey was just recently down there along with a number of other

people. I don’t think it quite gets the attention right now that other

places in the world do get. But after that, I think working on the

global cartel issues—because we not only see the flow coming

through Mexico at times and into the United States, we see a flow

coming out of South America into West Africa, Europe, the UK, etc.

And somebody had mentioned we are all in this lifeboat together,

with increasing addict populations and increasing drug problems.

So when Tony talks about this shared cooperation, particularly

among law enforcement agencies regardless of nation, I think that

has the most potential. But Mexico would be at the top of my list.

Mr. FOSTER. Mr. Duncan, you are recognized for 5 minutes.

Mr. DUNCAN. Thank you, Mr. Chairman.

It was mentioned a while ago that 90 percent of the heroin comes

up from South America, but Mr. Placido just said three of the four

major drugs are primarily coming through Mexico. Do we know

what percentage of the drug activity overall is coming from Mexico?

Mr. PLACIDO. Sir, if I misspoke let me correct myself. The interagency assesses that 91 percent of the cocaine which enters the

United States actually, whether it comes through the Caribbean or

up the isthmus of Central America, finds its way into Mexico to

cross the border in the Southwest. So that is cocaine.

The four principal illicit drugs of abuse would be marijuana,

methamphetamine, heroin, and cocaine, and what we know is that

in addition to 91 percent of the cocaine transiting Mexico before it

arrives, a very large percentage of the methamphetamine abused

in the United States is either manufactured in or comes from Mexico. I don’t know that we can put a number on it with precision.

I have heard numbers that range from the 70 to 80 percent range.

Whether those are accurate or not, it is a significant amount.

And we also get a very large percentage of the heroin, which is

either manufactured in Mexico or South American heroin, principally from Colombia, that transits Mexico on it is way to the

United States.

So Mexico has become a very critical transshipment point for

many of the drugs that arrive in the United States.

Mr. DUNCAN. How are those drugs coming in? I know there are

thousands of trucks that come from Mexico every day. Is most of

it coming in on these trucks, or how is it coming in?

Mr. PLACIDO. Well, I suspect that if we knew with precision the

answer we could really do something about it. What we know is the

seizures that we do effect reflect ingenuity by the traffickers. Million-dollar-a-copy, self-propelled, semi-submersible vessels, essentially a poor man’s submarine, that are used on a one-way trip

where the drugs are ballast, bring it up into the isthmus of Central

America and into Mexico where it is staged and moves across the

border. We see backpacking of marijuana and other drugs across

the border between ports of entry, ingenious concealments in vehicles and on railcars going across the border.

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Given the enormous profits that are at stake, the traffickers have

used planes, trains, and automobiles, and I am sure some modes

of conveyance that we have not even learned of yet. But what we

do know is that based on the seizures that we make, the arrests,

and the information that we develop, that despite our best efforts

they are successful in smuggling large quantities of drugs into this

country.

Mr. DUNCAN. What percentage of the vehicles coming from Mexico are inspected for drugs each day?

Mr. PLACIDO. I am afraid I am not the best person to address

that question. That would probably be best addressed by somebody

in the Bureau of Customs and Border Protection.

What I can say for the record is that it is a relatively small number, and there is a constant tension between facilitating lawful

commerce across the border and inspecting for contraband.

Mr. DUNCAN. Yes, sir.

Mr. JOHNSON. In some manner of speaking, there is 100 percent

inspection, but the CBP, Customs and Border Protection, has to

make a decision as to whether a vehicle or a trailer deserves further. They have a range of equipment to do so. But as Tony was

mentioning, the ability and ingenuity of these individuals to secret

their product in places, in cavities in cars that people don’t really

know exist really requires kind of a special touch by the customs

people to discern who might be a little dodgy and go after them in

a very concentrated way.

Mr. DUNCAN. Well, it seems to me a few minutes ago it was said

that almost none of these drugs in Afghanistan are coming to the

United States, they are going to Europe. Seems to me that we

should direct almost all of this effort in Mexico, where the problem

really exists, instead of to places where the problem doesn’t exist.

Thank you very much, Mr. Chairman.

Mr. TIERNEY [presiding]. Thank you very much, Mr. Duncan.

Ms. Chu, you are recognized for 5 minutes.

Ms. CHU. Thank you. Unfortunately, I know all too well how the

violence of the Mexican drug cartels can affect us here in the

United States. Last December, one of my constituents was the innocent victim of the drug cartels in Mexico. His name was Bobby

Salcedo, and he was abducted and murdered along with five other

men while visiting family members in Durango, Mexico. He was an

elected official and a rising star in our community. Neither he nor

the other five men had any connection to the cartels or the drug

trade. They were just in the wrong place at the wrong time.

Since Mr. Salcedo was murdered, I have been in touch with the

Secretary of State, representatives for the FBI and representatives

from the Mexican Government to try to understand how we can

bring the killers to justice and also how we can curb the violence

of the drug cartels.

So I have questions on the Merida Initiative and money laundering, specifically with regard to Mexico.

First on the Merida Initiative, we know that this was started in

2007 but that out of the $830 million that has been appropriated

for Merida, only $26 million has been spent as of September 2009.

What I would like to ask is the Merida Initiative, I believe, was

a very important first step toward a strong cooperative relationship

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between the United States and Mexico, but the official agreement

ended last year and the administration has not yet come up with

a comprehensive plan to succeed this initiative.

What are the plans for the future and what would be your recommendations?

Mr. JOHNSON. Thank you, Madam Congresswoman. A couple of

preliminary comments.

I think that the Merida Initiative represents a new and comprehensive method of cooperation between us and the Mexican authorities and the type of engagement we have had with them during the course of this is in a different plane than it has been before.

This is an ongoing program. What we are trying to do, working

with the Mexicans, is trying to figure out what the next steps are

beyond what we are already committed to do together, what sort

of Merida II, if you will, will be. But our work with them under

the current program continues unabated and is very, very aggressive.

The second point I would like to make is while that $26 million

number that you cited from the GAO report is correct in terms of

‘‘expended,’’ it doesn’t really reflect what has been done. For example, the appropriation for the Blackhawk helicopters that have been

purchased, that will not appear as an expended fund for some time

because we don’t actually pay the bills until the product is delivered, accepted, and everything is done in order to protect the taxpayer. Those aircraft have already been manufactured, they have

been delivered by Sikorski, they are in Huntsville, AL, being modified for the Mexicans’ needs and they will be delivered to them we

believe sometime in the early to mid-summer.

So many of these programs continue even though they are not reflected in that number. That doesn’t mean that we don’t want to

accelerate that just as rapidly as we possibly can. We are very

grateful to Sikorski and the Army for having found a place in the

queue, if you will, to accelerate this delivery in a way that didn’t

affect our own Army’s delivery of these helicopters, for example.

We are taking as many steps like that as we can. We have delivered about 50 of these nonintrusive inspection vehicles that they

require for their police and their border officials, a like number of

armored vehicles. Programs we have developed to train investigators that bring in our own law enforcement authorities from DEA,

from FBI, from State and local government in Houston and Chicago and Los Angeles.

So there are a number of aggressive programs going on that I

think reflect more clearly the effort that we have underway with

Mexico.

Ms. CHU. Can you tell me what Merida II might look like?

Mr. PLACIDO. I think that what the distinction will be that much

of the, if you will, big ticket items have been covered under the current appropriation: aircraft, nonintrusive inspection equipment,

things of that nature that are truly quite expensive. As we look forward, we are going to want to concentrate much more on training

and institution building and helping the Mexicans transform their

police service and their courts and their prosecution so that they

are much more effective.

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Ms. CHU. In fact, I am glad you talked about the equipment because when I talked to Ambassador Sarukhan he did express concern that the Mexican Government has not yet received some of the

equipment that was promised under the Merida Initiative.

Are the items that you talked about the main items that are

really on the books but have not yet been delivered?

Mr. PLACIDO. The items that I mentioned to you have in fact

transited to the border and are in the hands of the Mexican authorities. I appreciate that the Mexicans want to push this as hard

as they can go and get materials as quickly as they can. There has

been a number of deliveries already. The Bell helicopters are there

as of last fall. These things are ongoing, but we are working with

the Mexican authorities to move them just as quickly as we can.

Ms. CHU. My next questions have to do with the money laundering aspect.

I understand that they have made progress on electronic transfers that have to do with money laundering but that there is a big

problem with the bulk cash smuggling and that there need to be

more remedies along those lines.

Could you talk about that?

Mr. PLACIDO. The effort that we have underway with the bulk

cash smuggling issue that I am primarily responsible for has to do

with giving the Mexicans greater capacity to detect cash that is

being smuggled into Mexico. As Director Kerlikowske was mentioning a few minutes ago, the Mexicans are now inspecting southbound cargo in a way that they have never done before, and they

are utilizing some of this equipment that we have provided both at

the land border and at air transit points and at marine points as

well. These are the points of capabilities that will allow them to see

into things as odd as tractor axles where moneys are secreted.

I think that will get to part of the problem, but I have to say that

is an integral part of the larger effort to stop money laundering

through financial institutions, and that continues to be a work in

progress. We have made some progress on that, but there is much

more work to be done because we know there are billions flowing

in through the accounting systems that we have in our banking

system and theirs, and we are only catching a sliver of that.

Ms. CHU. Thank you.

Mr. TIERNEY. Mr. Flake.

Mr. FLAKE. I just have one more question.

It has been said in your testimony and also we have heard from

others that West Africa is becoming a transit point, Guinea Bissau

in particular, some of the other countries.

What are we doing proactively? What structures can we put in

place now, both financially and otherwise, with DOD to try to head

this off before it becomes more of a problem? Is there something

that, looking back now at Latin America and South America and

everything else, that we could have done more easily before it became such a big problem that we can do in West Africa?

And I will go with Mr. Szubin first on that.

Mr. SZUBIN. It is a real challenge that you are raising, and I

think that the financial system there, the capacity of the regulatory

system, the government, is really not where it needs to be in order

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to replicate what we have been able to do in some other places, and

it is not a quick fix.

I get a lot of e-mails from Nigerians every day. I would encourage you not to send money.

Mr. FLAKE. Good advice. Thanks.

On DOD’s side, anybody want to add anything, or anybody else,

on proactively what can we do to make it easier before it becomes

more of a problem than it is?

Mr. JOHNSON. As Adam mentioned, this is going to be probably

harder than Latin American rather than easier, and that is because of the weak nature of these governments and the institutions

that they have. We have jointly done some assessments of their capabilities. We have worked with DEA to help build their partners,

and this is a nascent effort.

But we believe that the most effective way is going to be investing in building institutional capacity in those governments so that

they can detect, prosecute, incarcerate people as well as build the

type of linkages that we need so that they can extradite people to

the United States, if indeed their activities implicate activities that

are prosecutable under our laws.

Mr. PLACIDO. The only thing I would add, Mr. Flake, is that

through the generosity of Congress, the Drug Enforcement Administration has been able to open a second office in West Africa in

2009 in Accra, Ghana, and it was through the opening of that office

and the creation of vetted teams that we are working with that we

are able to, for example, this latest investigation linking AQIM, alQaida in the Islamic Maghreb, with drug trafficking. And our colleagues in Ghana expelled these folks and they are sitting in a

prison in New York awaiting trial.

So there are things that can be done. I believe this is an order

of magnitude problem. We are not resourced at a level that is commensurate with the problem that we face over there, and there is

engagement with organizations like ECOWAS, the Economic Council of Western African States, and perhaps ILEA training for some

of our counterparts over there. There is much in the works but a

long, long way to go.

Mr. FLAKE. Thank you, Mr. Chairman. I believe you are going to

take care of this, but several Members on this side want to submit

questions. So if we can unanimous consent to allow them to submit

them for 5 days.

Mr. TIERNEY. There is unanimous consent to allow all Members

to submit remarks and questions to the witnesses within the next

5 days.

Do any of the witnesses have any objection to that? The record

will reflect that they are all willing to do that, and by unanimous

consent that will be the case.

Just one last set of brief questions.

Mr. Szubin, you properly staff the Treasury. Does it have enough

personnel in collaboration with your colleagues here and your own

staff to address this at the level that you want to address it?

Mr. SZUBIN. We are a much smaller outfit obviously than some

of my colleagues located here, and that is as it should be. We don’t

need to do the very difficult work of drug eradication.

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Mr. TIERNEY. I am assuming that you leverage them for some of

the things that you need. Would that be a correct statement?

Mr. SZUBIN. That is very accurate. And it is DEA’s field investigators, the information they are obtaining, the information that

our intelligence colleagues are obtaining that then feeds and fuels

our targeting efforts to apply sanctions.

Mr. TIERNEY. Do you find like other aspects of this drug situation

that when you shut off one avenue there are still too many avenues

that are left available, and those would be countries that don’t cooperate with the United States, and what other impediments do we

have?

Mr. SZUBIN. I didn’t hear the last few words.

Mr. TIERNEY. The impediments that we have for getting this

right? Some countries still just don’t cooperate and are there other

impediments as well?

Mr. SZUBIN. I heartily agree that wherever you hit them, they

then move to another area. Whether that is another means of

transmitting money, whether we are talking about moving from financial system to the gray market, casa de cambios, and bulk cash.

There is also, as soon as we designate a company, we know that

there is going to be efforts to circumvent sanctions, to create a new

company, a new shell, a new front, and disguise the assets. This

is our bread and butter, is not just designating a network and

walking away from it but then monitoring very closely to see what

are springing up as the attempts at evasion and hammering them

again. There is a cat-and-mouse aspect to it which I think is common to all law enforcement efforts, and we have to keep at it.

Mr. TIERNEY. I want to give each of you an opportunity. If anybody feels they want to contribute something but feels they weren’t

given that chance, just give me some acknowledgement here, and

I will be happy to give you an opportunity to make a closing statement on that.

Mr. Kerlikowske.

Mr. KERLIKOWSKE. Mr. Chairman, there was some discussion

about efforts to promote legalization. The administration is on the

record 100 times over that legalization of drugs is not in the President’s vocabulary, it is not in mine, and it is not anything being

discussed.

Role models. There is only one anti-drug messaging system out

there. The President requested $70 million for that, and I think

that is important.

And then Mr. Placido brought up the number of deaths in this

country, the tragic number of deaths in this country that exceed

gunshot wounds that are due to drugs. That has been spiked by

prescription drugs, drugs coming right out of medicine cabinets and

pharmaceutical places, not necessarily drugs flowing into the country from other countries.

Mr. TIERNEY. Anybody else? Ambassador.

Mr. JOHNSON. Just to followup on a couple of points, on the issue

that Mr. Flake raised with respect to West Africa, we are doing our

best to get ahead of this problem. The Presidential request for assistance to West Africa for institution building goes up sharply in

this budget from a relatively small base but to $131⁄2 million, and

while it is dwarfed, if you will, by some of our other programs there

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is a capacity takedown from the governments involved that we

have to pay attention to. Showering them with more and more resources may be not be the best way. We are going to have to build

and work with our partners, as Tony was mentioning, both within

our government and without.

The second point I would make is, as Will was mentioning earlier, this is very much an every agency at the table operation.

There is a role for Africa on here, there is a very big role for DEA,

there is a role for institution building as well, and a role for institution finance.

The second point to followup I would make, there was a question

raised earlier about whether we should drop everything else we are

doing and work just on Mexico. That is a very important challenge

that we have, and the law of concentric circles certainly works. But

we have an incredible national interest in addressing the problems

of Afghanistan in order for our colleagues in the military to succeed.

So while the heroin problem from Afghanistan affects largely its

immediate neighbors, particularly Iran and the Central Asian

countries, as well as Europe and the Russian Federation, we have

an enormous interest in helping deal with that problem because if

we don’t we are not going to succeed there in any other way at all.

Thank you.

Mr. PLACIDO. Mr. Chairman, if I could just add to briefly clarify

the record. It has been mentioned several times that hardly any of

the heroin from Afghanistan comes to the United States. In point

of fact, we run a forensic chemistry program that identifies the

source geographically of the heroin that is seized in the United

States, and there is a small percentage, about 4 percent, of the heroin seized and analyzed by our DEA laboratories has its origins in

Southwest Asia, Afghanistan. But more importantly is that a large

percentage of the heroin abused in Canada today comes from

Southwest Asia and Afghanistan, and so it would be a mistake to

simply say that this is a European problem or a problem in Iran

or Russia or other places which feel the bite of Afghan heroin more

strongly today because these networks that are smuggling into

Canada could very easily move that heroin into the United States

and undercut the market quickly. So it is not something that we

can take our eye off the ball on.

Mr. TIERNEY. Let me leave this closing question with you. When

we look at a range of drugs that cause problems for people, either

result in deaths or addiction or health problems, alcohol is way up

there. In fact, it is way over some of these drugs that we are talking about here today.

So how do we reconcile that, that alcohol is way up there, we

spend very little attention on that. Marijuana, for instance, is way

down there, and we spend an incredible amount of attention on

that. Are we prioritizing any of our efforts on that, or are we taking that into account at all?

Mr. Kerlikowske, I am going to let you do that one.

Mr. KERLIKOWSKE. Mr. Chairman, the issue of underage drinking

has been in all of the past National Drug Control Strategies, a discussion about it. I think it is well recognized. It isn’t exactly in my

portfolio, but we are certainly able to address it and talk about it

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because we also see that combination of alcohol and other types of

drugs. And your points, sir, are well taken.

Mr. PLACIDO. Sir, I would just add that our guidance from the

Department of Justice and from ONDCP, for that matter, on the

prioritization from these drug threats is crystal clear, and while

there has been much news about law enforcement operations targeting medical marijuana, pain clinics and the like, I can tell you

it is a miniscule part of DEA’s overall effort that is spent on those

kinds of operations and that when we do get engaged in those it

is because the people engaged in that activity are violating both

State and Federal law and we are doing it with the help and at

the request of State governments.

Mr. TIERNEY. So you are going to tell me, Mr. Placido, that every

time the Federal DEA goes into a State that has legalized medical

marijuana and makes a bust or an arrest in there or gets involved

in that, you have been requested to go in by the State?

Mr. PLACIDO. We are working in conjunction with the States.

That is right, sir.

Mr. TIERNEY. You are working in conjunction with them, but

have you been requested to go in by them or is it an initiative of

the Federal Government?

Mr. PLACIDO. It depends on at what level you are talking about,

the request. There is not a formal request coming from the Governor’s office but oftentimes working with local, municipal, and

community authorities who have requested assistance.

Mr. TIERNEY. I have read quite a bit lately that there seems to

be some discontent with the fact that the policy was that people

were legalized for medical use in different States and the Federal

Government would basically allow that policy to be implemented,

but the DEA seems to be, according to these accounts, a bit of a

rogue agency and just going off and doing it anyway.

Mr. PLACIDO. I would assert that is not the case, sir, and I would

be glad to provide you with a briefing on that.

Mr. TIERNEY. Mr. Kerlikowske.

Mr. KERLIKOWSKE. Mr. Chairman, also the guidelines from the

Attorney General’s Office to the U.S. Attorneys in those States

with medical marijuana, there is a sentence that says that they

should listen to the concerns voiced by local law enforcement and

prosecutors to be receptive to that issue.

Mr. TIERNEY. I understand that to be the case, but what we are

reading about is that there aren’t any complaints and they decide

that they are going in anyway despite local considerations otherwise. So I do want to clarify that and I would like at least a staff

briefing on that so we can clarify that issue.

I want to thank all of the witnesses for being here today for your

testimony and expertise. We will do the followup questions. And I

know that Members were not leaving because of disinterest, but

there is a ceremony for Mr. Murtha, who passed away, right now

that has drawn a lot of Members away.

This hearing is adjourned.

[Whereupon, at 11:50 a.m., the subcommittee was adjourned.]

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