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S. HRG. 112–793 

COMBATING INTERNATIONAL ORGANIZED CRIME: 

EVALUATING CURRENT AUTHORITIES, TOOLS, 

AND RESOURCES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CRIME AND TERRORISM 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

NOVEMBER 1, 2011 

Serial No. J–112–49 

Printed for the use of the Committee on the Judiciary 

( 
(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

CHUCK SCHUMER, New York 

DICK DURBIN, Illinois 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

JON KYL, Arizona 

JEFF SESSIONS, Alabama 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

MICHAEL S. LEE, Utah 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

KOLAN DAVIS, Republican Chief Counsel and Staff Director 

SUBCOMMITTEE ON CRIME AND TERRORISM

SHELDON WHITEHOUSE, Rhode Island, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

DICK DURBIN, Illinois 

AMY KLOBUCHAR, Minnesota 

CHRISTOPHER A. COONS, Delaware 

JON KYL, Arizona 

ORRIN G. HATCH, Utah 

JEFF SESSIONS, Alabama 

LINDSEY GRAHAM, South Carolina 

STEPHEN LILLEY, Democratic Chief Counsel 

STEPHEN HIGGINS, Republican Chief Counsel 
(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa, prepared 

statement .............................................................................................................. 61 

Kyl, Hon. Jon, a U.S. Senator from the State of Arizona, prepared statement . 103 

Whitehouse, Hon. Seldon, a U.S. Senator from the State of Rhode Island ........ 1 

prepared statement .......................................................................................... 106 

WITNESSES 

Breuer, Lanny A., Assistant Attorney General, Criminal Division, U.S. Department of Justice, Washington, DC ................................................................ 3 

Glaser, Daniel L., Assistant Secretary for Terrorist Financing, U.S. Department of the Treasury, Washington, DC ............................................................. 4 

Kibble, Kumar C., Deputy Director, U.S. Immigration and Customs Enforcement, U.S. Department of Homeland Security, Washington, DC .................... 6 

QUESTIONS AND ANSWERS 

Responses of Lanny A. Breuer to questions submitted by Senators Leahy, 

Grassley, Klobuchar and Durbin ........................................................................ 26 

Responses of Daniel L. Glaser to questions submitted by Senator Durbin ........ 37 

Responses of Kumar C. Kibble to questions submitted by Senator Durbin ....... 39 

SUBMISSIONS FOR THE RECORD 

Breuer, Lanny A., Assistant Attorney General, Criminal Division, U.S. Department of Justice, Washington, DC, statement ............................................. 41 

Glaser, Daniel L., Assistant Secretary for Terrorist Financing, U.S. Department of the Treasury, Washington, DC, statement .......................................... 52 

Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa, attachment: 

List of Documents 

Department of Justice, February 4, 2011, letter ............................................ 63 

Department of Justice, Lanny A. Breuer, Assistant Attorney General 

and Kenneth Melson, Acting Director, December 3–4, 2009, e-mails ...... 65 

Department of Justice, Joseph Cooley, Trial Attorney, Gang Unit, March 

1, 2012, e-mails ............................................................................................. 66 

Department of Justice, Joseph Cooley, Trial Attorney, Gang Unit, March 

5, 2010, notes ................................................................................................ 67 

Department of Justice, Gary Grindler, Acting Deputy Attorney General, 

March 12, 2010, notes ................................................................................... 70 

Department of Justice, P. Kevin Carwile, Chief, Gang Unit, March 15, 

2010, e-mails ................................................................................................. 77 

Department of Justice, Jason Weinstein, Deputy Assistant Attorney General, April 30, 2010, e-mails ......................................................................... 78 

U.S. Senate Caucus on International Narcotics Control, November 15, 2011, 

letter ...................................................................................................................... 79

Holder, Eric H., Jr., Attorney General, Washington, DC, October 7, 2011, 

letter ...................................................................................................................... 81

Kibble, Kumar C., Deputy Director, U.S. Immigration and Customs Enforcement, U.S. Department of Homeland Security, Washington, DC, statement . 86 

National Retail Federation, Washington, DC, statement and report .................. 108 

Newell, William D., Mexico Weapons Trafficking - The Blame Game, July 

7, 2010, e-mails .................................................................................................... 136 

(1) 

COMBATING INTERNATIONAL ORGANIZED 

CRIME: EVALUATING CURRENT AUTHORITIES, TOOLS, AND RESOURCES 

TUESDAY, NOVEMBER 1, 2011 

U.S. SENATE, 

SUBCOMMITTEE ON CRIME AND TERRORISM, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 9:31 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Sheldon 

Whitehouse, Chairman of the Subcommittee, presiding. 

Present: Senators Whitehouse, Feinstein, Klobuchar, Coons, and 

Grassley. 

OPENING STATEMENT OF HON. SHELDON WHITEHOUSE, A U.S. 

SENATOR FROM THE STATE OF RHODE ISLAND 

Chairman WHITEHOUSE. Good morning. The hearing will come to 

order. I appreciate the witnesses’ having taken the time to join us. 

I am not sure if any of our Republican members will be joining us, 

but I have been given the nod by the minority staff to go ahead 

and proceed, so I will begin with my opening statement. If anybody 

else does arrive, we can proceed to their opening statements if they 

care to make one. 

Every day, as we know, overseas criminal networks target Americans, weakening our economic prosperity and compromising our 

safety. Today’s hearing provides us an opportunity to evaluate our 

current statutory authorities, law enforcement tools, and resources 

for protecting the American people from the serious and ever growing threat of international organized crime. 

The international organized crime networks we confront today 

are significantly different from La Cosa Nostra and other criminal 

networks we confronted in the past. Criminal groups increasingly 

operate internationally, taking advantage of globalization, of the 

Internet, and of new technologies to engage in sophisticated and 

expansive crimes targeted at victims an ocean away. 

Overseas networks of cyber criminals have hacked into the computer networks of innovative American businesses, stealing their 

valuable intellectual property in order to produce cheap competitors or counterfeits. Large-scale criminal enterprises are openly engaged in the online sale of massive amounts of stolen American 

movies, music, and software. And an entire criminal industry has 

grown up around stealing and selling credit card numbers, bank 
2 

account passwords, and personal identification information of 

American consumers. 

Criminal groups involved in human trafficking or smuggling narcotics and weapons are dangers to our communities, often engaged 

in kidnapping, extortion, and related acts of violence along the 

way. Some overseas crime networks are linked to terrorist organizations. 

These foreign criminals’ overseas base of operations, flexible network structures, and use of the Internet and other modern tools 

creates significant challenges for U.S. law enforcement. Investigators tracking an international crime group must regularly work in 

and with several different countries to build a single case. The laws 

and practical circumstances in each country pose obstacles to uncovering evidence, to interviewing witnesses, to locating criminal 

suspects. And the high-tech tools used by foreign criminals require 

our law enforcement experts to use complex and often costly 

forensics to identify those responsible for a crime. 

Even once investigators have pieced together a case against a 

dangerous group and found their suspects, additional hurdles may 

stand in the way of bringing foreign criminals to justice. Criminal 

statutes, for example, may not apply to criminal groups based overseas. And some of our most powerful criminal laws for prosecuting 

organized crime may not capture the types of fraud and theft that 

international criminals engage in today. Our RICO statute, for instance, does not apply to computer crimes and, thus, does not help 

combat overseas hacking rings. 

Overseas criminal groups demand heightened attention and resources from many elements of our Government. Investigative and 

law enforcement agencies must work together to detect and disrupt 

overseas criminal plots. They must also collaborate with our economic, diplomatic, and intelligence communities to share threat information, cut off criminal networks’ access to funds, and supplement criminal prosecutions with other approaches to keeping the 

American people safe. 

It is good that the administration has announced an aggressive 

strategy to combat international organized crime and prepared specific legislative recommendations on which Congress can act. Today 

we are joined by representatives from the Department of Justice, 

the Treasury Department, and ICE who are well positioned to discuss the threats we face in foreign criminals. I also look forward 

to hearing more from them about what actions the administration 

has taken and what we in Congress can do to provide law enforcement with the tools it needs to confront this challenge. 

Protecting American citizens and business from foreign criminals 

is no partisan issue. Members of Congress in both parties agree 

that we must strengthen our ability as a Nation to take down these 

overseas criminals. 

Our Ranking Member, Senator Kyl, is unfortunately not able to 

join us today because of his important commitments on the Debt 

Committee, but I have greatly enjoyed collaborating with him this 

year on legislation concerning cybersecurity and on other hearings, 

and I look forward to working with him and other members of the 

Committee on this important issue. 
3 

Since there is no one immediately present to make further opening statements, we can get right to the meat of the hearing, which 

is always a good thing. I would just go right across the panel here, 

beginning with Lanny Breuer, who is the Assistant Attorney General for the Criminal Division at the Department of Justice. Before 

joining the Justice Department, he was a partner at Covington & 

Burling, LLP, here in Washington, where he served as co-chair of 

the white-collar defense and investigations practice group. Previously in his career, he served as an assistant district attorney in 

Manhattan and as Special Counsel to President Clinton. He received his B.A. from Columbia College and his J.D. from Columbia 

Law School, and we are pleased to have him here today. 

Mr. Breuer, please proceed with your testimony. 

STATEMENT OF HON. LANNY A. BREUER, ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF 

JUSTICE, WASHINGTON, DC 

Mr. BREUER. Good morning, Mr. Chairman. It is a real pleasure 

to be here. Thank you for the opportunity to appear before you 

today along with my partners from the Departments of Treasury 

and Homeland Security to discuss the Justice Department’s efforts 

to address the threat posed by transnational organized crime. 

Transnational organized crime poses a grave and growing threat 

to our economic and national security and the safety of our citizens. 

These groups commit a staggering array of crimes, all the way from 

credit card fraud and cyber crime to violent crime and drug trafficking. They penetrate and undermine Government institutions, 

they threaten the world financial system, and they subvert legitimate markets. For these reasons, the task of combating 

transnational organized crime has never been more urgent. 

The fight against transnational organized crime is among the 

highest priorities of this Administration, and the Justice Department is proud to play a leading role in that effort. The Department 

has made great strides in attacking transnational organized crime 

groups. As the cases highlighted in my written testimony illustrate, 

our work often depends upon our close relationships with foreign 

law enforcement. It is often impossible to identify, arrest, and prosecute offenders or obtain critical evidence without the assistance of 

our allies. 

To give just one example, our prosecutors and agents work with 

Romanian law enforcement to target organized criminal groups operating in that country that threaten American citizens and institutions. Just last month, I traveled to Romania and saw firsthand 

how closely our two nations are working together, and that work 

is paying off. For instance, early this year joint investigations resulted in the arrest of over 100 organized cyber criminals in our 

two countries. But the challenges to pursuing these groups remain 

significant. 

For example, law enforcement in some countries is unable or unwilling to cooperate with our investigative efforts. In addition, finding the assets of sophisticated criminal organizations often involves 

unraveling a web, a sophisticated web of shell corporations used to 

disguise and launder profits. And even if we are able to build a 
4 

case, securing extradition of the defendants often poses a significant obstacle. 

Attorney General Holder and I have taken important steps to 

better position the Justice Department to confront 21st century organized crime. In 2009, the Attorney General announced the creation of the International Organized Crime Intelligence and Operations Center, or IOC–2, which coordinates the efforts of nine Federal law enforcement agencies against transnational organized 

crime networks. And late last year, the Attorney General accepted 

my recommendation to merge the Organized Crime and Gang Sections within the Criminal Division to make more efficient and effective use of our resources to go after organized crime groups both 

here and abroad. With the support of Congress, that merger took 

effect earlier this year. 

But combating the threats posed by transnational organized 

crime requires more than effective law enforcement. To that end, 

in July the Administration announced a cutting-edge strategy that 

for the first time brings all of the resources and tools of the Federal 

Government to bear in a coordinated way against transnational 

criminal groups. 

One of the centerpieces of our new strategy is a package of essential legislative updates designed to ensure that we have the tools 

we need to confront these evolving threats. This package includes 

changes to our money laundering and forfeiture laws to improve 

our ability to break the financial backbone of criminal organizations. We also seek to modernize our racketeering laws. And we 

propose other amendments aimed at addressing the increasing 

global reach of these organizations. We believe that these legislative proposals will enhance our ability to attack transnational 

criminal groups wherever they are and protect the American people 

from this global threat. 

Thank you for the opportunity to discuss this important issue 

with you, and I am, of course, pleased to answer your questions. 

[The prepared statement of Mr. Breuer appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you, Mr. Breuer. 

Our next witness is Daniel Glaser, the Assistant Secretary for 

Terrorist Financing at the Department of Treasury’s Office of Terrorism and Financial Intelligence. He has also served as Treasury’s 

Deputy Assistant Secretary for Terrorist Financing and Financial 

Crimes. In addition to his prior roles at the Treasury Department, 

he has served as an attorney for the United States Secret Service 

and as the head of the U.S. delegation to the Financial Action Task 

Force, an intergovernmental agency charged with formulating policies to combat international money laundering and terrorism financing. He is a graduate of the University of Michigan and the 

Columbia University School of Law, and we welcome him here. 

Mr. Glaser. 

STATEMENT OF HON. DANIEL L. GLASER, ASSISTANT SECRETARY FOR TERRORIST FINANCING, U.S. DEPARTMENT OF 

THE TREASURY, WASHINGTON, DC 

Mr. GLASER. Chairman Whitehouse, distinguished members of 

the Committee, thank you for the opportunity to appear before you 
5 

today to discuss the Treasury Department’s contribution to the 

Obama administration’s strategy to transnational organized crime. 

In my testimony today, I will focus on the Treasury Department’s 

efforts to implement this strategy with the use of our unique authorities, including Executive Order 13581, as well as our ongoing 

work to promote financial transparency both domestically and 

abroad. 

In early 2010, the United States completed a comprehensive assessment of transnational organized crime which concluded that 

these networks have expanded in scope and sophistication, engage 

in a range of illicit activities, and are exploiting the international 

financial system. To combat this growing threat to U.S. interests, 

the Obama administration announced the national strategy to combat transnational organized crime that utilizes new and innovative 

capabilities and tools to combat this threat. The most significant 

new tool is Executive Order 13581, designed to specifically block 

the property of major transnational criminal organizations. In the 

Executive order, the President identifies and imposes sanctions on 

four significant criminal organizations: the Brothers’ Circle in Russia, the Camorra in Italy, the Yakuza in Japan, and Los Zetas in 

Mexico. These groups’ growing infiltration of legitimate commerce 

and economic activity threatens U.S. economic interests at home 

and abroad through subversion, exploitation, and distortion of legitimate markets and economic activity. The result is a convergence of complex, volatile, and destabilizing threats to U.S. national security. 

The Treasury Department is now implementing a strategy to effectively implement Executive Order 13581. First, we are attempting to map the financial networks of these organizations so we can 

target them with derivative designations, thereby undermining 

their ability to operate effectively within the international financial 

system. Our efforts will complement U.S. law enforcement authorities in the fight against the criminal organizations, building on our 

already close cooperation with the U.S. Department of Justice. 

We will also work with like-minded foreign partners and the 

international financial community to build an international coalition to combat transnational organized crime more broadly. In fact, 

I will travel to Moscow next week to discuss this very issue and 

build on our ongoing cooperation with our Russian counterparts. 

Of course, the Treasury Department will not limit our efforts to 

these four groups or solely to this Executive order. We will also 

seek out new organizations to target, and we will employ our full 

arsenal of tools, including Section 311 of the USA PATRIOT Act. 

The success of our efforts to combat organized crime through targeted action also relies on our ongoing work to promote a transparent global financial system. Transnational criminals seek to exploit the complexity and opacity of the international financial system. We, therefore, must enhance financial transparency and diminish their ability to commit and profit from crime. In order to 

improve this transparency, the Treasury Department has worked 

internationally to create a global anti-money laundering and 

counterterrorism financing framework as a foundation for taking 

action against criminal groups. This work has been advanced 
6 

through such organizations as the Financial Action Task Force, the 

IMF, the World Bank, and the G–20. 

These efforts, however, are undermined by the ability of criminal 

organizations to launder illicit proceeds through the abuse of legal 

entities. Accordingly, Treasury has developed a strategy to address 

this vulnerability in the U.S. and international financial systems. 

First, we are working with our interagency partners and with 

Congress, including in particular Senator Levin, to develop new 

legislation that will enhance the ability of beneficial ownership information to law enforcement about legal entities created in the 

U.S. 

Second, we plan to clarify and strengthen customer due diligence 

requirements for financial institutions with respect to the beneficial ownership of legal entities. 

Finally, we are working with our international partners in the 

FATF to clarify and facilitate the global implementation of international standards regarding beneficial ownership. Without widespread global implementation, illicit actors could evade strengthened U.S. requirements and access the U.S. financial system 

through other means. 

Transnational organized crime presents a persistent and unique 

security threat to our financial system. Our efforts to combat this 

threat will persist, and we will continue to find innovative ways to 

disrupt and dismantle illicit financial networks, and to ensure that 

the international financial community builds strong systems to 

counter penetration by organized crime groups. 

Thank you for the opportunity to testify today, and I look forward to answering any questions. 

[The prepared statement of Mr. Glaser appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you, Mr. Glaser. 

Our final witness is Kumar Kibble, who is the Deputy Director 

for U.S. Immigration and Customs Enforcement at the Department 

of Homeland Security. He has served in leadership roles at ICE 

headquarters, including as the Deputy Assistant Director for the 

National Security Investigations Division and as Deputy Director 

and Acting Director of Investigations. Mr. Kibble began his Government career in 1990 as an infantry officer in the U.S. Army’s 82nd 

Airborne Division. He is a graduate of the U.S. Military Academy 

at West Point. We are pleased he is here. 

Mr. Kibble. 

STATEMENT OF KUMAR C. KIBBLE, DEPUTY DIRECTOR, U.S. 

IMMIGRATION AND CUSTOMS ENFORCEMENT, U.S. DEPARTMENT OF HOMELAND SECURITY, WASHINGTON, DC 

Mr. KIBBLE. Chairman Whitehouse and distinguished members 

of the Subcommittee, on behalf of Secretary Napolitano and Director Morton, thank you for the opportunity to discuss ICE’s role in 

combating transnational organized crime. 

Our roughly 20,000 employees include 7,000 homeland security 

investigations—or HSI—special agents assigned to more than 200 

cities throughout the United States and 70 foreign offices around 

the world. This global team focuses exclusively on investigating 

transnational threats. HSI investigators are uniquely equipped 
7 

with cross-border authorities, expertise, and information enabling 

them to disrupt and dismantle transnational criminal networks operating along the entire illicit travel and trade pathways in destination, transit, and source countries. 

Just yesterday, we announced the results of Operation Pipeline 

Express, a 17-month multi-agency investigation responsible for dismantling a massive narcotics-trafficking organization affiliated 

with the Sinaloa Cartel. Conservative estimates indicate that during a 5-year period this organization smuggled more than 3.3 million pounds of marijuana, 20,000 pounds of cocaine, and 10,000 

pounds of heroin into the United States, generating almost $2 billion in illicit proceeds. HSI agents, working with the Pinal County 

sheriff’s office, the Arizona Attorney General’s office, and more 

than 20 Federal, State, and local partners, arrested 76 subjects and 

seized more than 60,000 pounds of narcotics and more than 100 

weapons. The organization’s smuggling methods included use of 

backpackers, vehicles, and sophisticated countersurveillance operations. This case demonstrates how HSI targets transnational 

criminal organizations along the entire continuum of transnational 

crime beyond our borders in coordination with foreign partners, at 

our borders in coordination with Customs and Border Protection, 

and within our borders in cities throughout the United States in 

partnership with Federal, State, local, and tribal agencies. 

Over the last two decades, transnational organized crime has expanded dramatically in size, scope, and impact. In response, earlier 

this year the administration launched its new strategy to combat 

transnational organized crime, or the TOC Strategy. To support the 

administration’s strategy within ICE, we have developed the Illicit 

Pathways Attack Strategy, or IPAS. Using a risk-based approach, 

IPAS prioritizes our efforts to attack convergence points and 

vulnerabilities in the networks, routes, and infrastructure used by 

high-risk transnational criminal networks. 

Our first IPAS plan facilitates engagement with host country 

partners to increase joint human smuggling investigations, enhance exchange of information, build capacity, and support foreign 

and domestic prosecutions. A coordinated strategy of attacking 

human smuggling networks along the entire illicit travel continuum reduces pressure on our borders and assists partner nations in disrupting organized alien smuggling within their own territories. 

In addition to human smuggling, HSI works with our interagency and international partners to disrupt and dismantle criminal networks engaged in schemes that include intellectual property 

theft, arms and technology proliferation, bulk cash smuggling, child 

exploitation, human trafficking, drug smuggling, and transnational 

gang activity. 

But to truly dismantle these schemes, partnerships and information sharing with domestic and, more importantly, foreign counterparts are absolutely essential, and we lead several interagency centers to coordinate a comprehensive response to these threats. The 

National IPR Center brings together 19 Federal and international 

partners to address intellectual property theft. Through the center 

we are leading an effort to educate the public and audiences about 

IP theft and its connection with international organized crime. 
8 

Working with our Cyber Crime Center, or C3, the IPR Center has 

led innovative cyber operations resulting in the seizure of 200 domain names used to facilitate counterfeiting and copyright infringement. 

The Export Enforcement Coordination Center, created by Executive order last year and led by HSI, will coordinate counterproliferation investigations and industry outreach among CBP, the Departments of Homeland Security, State, Commerce, Treasury, Defense, Justice, Energy, and the Office of the Director of National 

Intelligence. And our Human Smuggling and Trafficking Center is 

an interagency fusion center and information clearinghouse to help 

coordinate interagency efforts involving human smuggling and trafficking. And, sadly, a significant number of these victims are children, and we take these cases very seriously. 

Bulk cash smuggling investigations are also coordinated through 

our Bulk Cash Smuggling Center through which we provide realtime operational and tactical support to Federal, State, and local 

officers involved in bulk cash smuggling seizures 24 hours a day, 

7 days a week. And we coordinate closely with the El Paso Intelligence Center to respond to these bulk cash smuggling inquiries 

from State and local agencies. 

Thank you again for the opportunity to appear before you today 

and for your continued support of ICE and its law enforcement 

mission. I would be pleased to answer any questions you may have. 

[The prepared statement of Mr. Kibble appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Let me thank the witnesses for being 

here and for their work. I do not need to tell you, as people who 

are on the front lines of this battle, that we have never been more 

vulnerable to international organized crime, and I certainly do not 

need to lecture you about the urgency of our response. You are living it. But I think you can tell us what tools we can provide you 

to make your job easier and more effective in dealing with this 

large, growing, and increasingly pernicious threat. 

Let me first ask a question about the scale of the enterprises 

that you are facing and compare for me the revenues, for instance, 

that you believe some of the largest criminal cartels and organizations have access to with the revenues of, let us say, small sovereign countries, just to give us a sense of the scale for starters. 

Mr. Breuer? 

Mr. BREUER. Thank you, Mr. Chairman. 

Mr. Chairman, you are absolutely right. The challenge that we 

face internationally and nationally in combating international organized crime is extraordinary, and some of these groups, of course, 

have sway that crosses borders easily and have become almost institutions, almost extraterritorial, if you will, states in and of themselves. If you talk about some of the groups in the former Soviet 

Union, if you talk about groups in Latin American cartels, they 

have amassed enormous resources, they are extraordinarily diversified, and they have, of course—— 

Chairman WHITEHOUSE. When you say enormous resources, compare it to—are they resources larger than the revenues of countries 

that we recognize—— 
9 

Mr. BREUER. Certainly, certain countries, yes, Senator, they are, 

and compared to some countries they absolutely are at least equivalent, or so we believe. And they are, of course, massively diversified, so it poses an enormous threat and underscores your point 

that to combat this, not only do we need to have enhanced tools, 

but we need to have our international partners join us in this very 

important preeminent battle. 

Chairman WHITEHOUSE. Mr. Glaser, anything to add on that? 

Mr. GLASER. Just to give you some numbers, Mr. Senator, the 

narcotics industry in the United States is reported to generate between $19 and $39 billion in profit per year. The Camorra, which 

is one of the groups you have targeted with our new Executive 

order, their annual budget has been estimated at up to $25 billion. 

The World Bank has estimated that there is $1 trillion per year 

that is spent in bribery around the world. So Lanny is absolutely 

right. We are talking about big numbers, and numbers that have 

the ability to skew the ability of governments around the world to 

really combat it. 

Chairman WHITEHOUSE. Do you agree, Mr. Kibble? 

Mr. KIBBLE. Yes, sir. I can even think of specific cases. The investigation we took down or announced yesterday, that group over 

a 5-year period generated $2 billion in revenue. I can think of a 

bulk cash smuggling investigation that resulted in the dismantling 

of a Colombian super cartel. That generated in excess of $5 billion. 

So we are talking about amounts that range into the billions. 

Chairman WHITEHOUSE. So the other question is, when I think 

back to my U.S. Attorney tenure and I consider the cases that we 

did that were the most intensive on the office, one was a public corruption case. It involved a lot of DOJ oversight because DOJ does 

a lot of oversight on public corruption cases, as you know, Mr. 

Breuer. It involved the RICO Act, racketeering prosecution, which 

has a number of complexities and also some oversight issues with 

DOJ. It involved undercover investigators who had to be backstopped and put in position. It involved working with confidential 

informants, which is always complex. And you put the whole thing 

together, and it was very time intensive and management intensive. It took a lot of work. 

We had an environmental case with a lot of forensic work that 

had to be done to rebuild what had happened to a burned tug and 

barge array in order to show the culpability of the company. And 

a wonderful FBI agent spent an enormous amount of time effectively virtually rebuilding, I guess you would say, that tug from its 

records so that we could show the necessary criminal standard had 

been met. 

You look at cases that are as intensive as that, and then you add 

to it the foreign element, and I am going to be out of time, so I 

will come back around to this some more in a second round. But 

just quickly scale for me in terms of gathering evidence, you can 

tail a suspect very readily in the United States if you are an FBI 

agent; you can get subpoenas; you can go out and interview witnesses. That is the very simplest part of a simple investigation. 

You move that to a foreign country, and all of that becomes suddenly complex. Could you comment on that? 
10 

Mr. BREUER. Of course, Mr. Chairman, you are exactly right. I 

am exceedingly proud of what we are doing, but the complexity is 

vast. When you have these transnational organized crime groups, 

we have to collect data internationally. We do that through law enforcement-to-law enforcement partnerships, all of which take a long 

time, because we have to build those relationships. If we are going 

to bring admissible evidence into court, we have to do that through 

mutual legal assistance treaties. Some countries are more progressive and quicker about those than others. 

We have to deal with byzantine financial records all over the 

world in different institutions that sometimes are more helpful or 

not helpful. And we have to do that with our resources. 

So these are very difficult. With some countries we have better 

relations; with others we have less. Some countries are more sophisticated, others are less. And with transnational organized 

crimes being so powerful, so wealthy, and so entrenched, identifying, exploiting our knowledge, and prosecuting is an overwhelming responsibility of ours. I think it is one we are doing well, 

but clearly it is a challenge that becomes harder each day. 

Chairman WHITEHOUSE. My time has expired. But before I turn 

to Senator Grassley, let me ask you for a one-word answer. Given 

the power and the wealth and the reach of these organizations, is 

it always clear in dealing with a foreign country that the foreign 

country is not on their side? 

Mr. BREUER. No. 

Chairman WHITEHOUSE. Thank you. 

Senator Grassley, and then on our side, in order of arrival, is 

Senator Feinstein, Senator Coons, and Senator Klobuchar. 

Senator Grassley. 

Senator GRASSLEY. Thank you, Mr. Chairman. 

Mr. Breuer, yesterday you made a public statement saying that 

ATF and U.S. Attorney’s Office officials ‘‘repeatedly assured officials in the Criminal Division and the leadership of the Department of Justice the allegations about walking guns in Fast and Furious were not true.’’ Please be more specific. Who exactly at ATF 

said that the gun-walking allegations were untrue? And who exactly at the U.S. Attorney’s Office said the allegations were untrue? 

Mr. BREUER. Senator Grassley, as I said yesterday, of course, it 

was my office that ultimately prosecuted the Wide Receiver case. 

I want to be very clear to you, Senator, that when I learned of this 

in April of 2010 and I learned about it and we decided to prosecute 

this case from 2006 and 2007, I regret that at that point, knowing 

then—knowing now, I wish that at that time that I had said clearly 

to the Deputy Attorney General and the Attorney General that, in 

this case, Wide Receiver, we had determined that in 2006 and 2007 

guns had walked. I did not do that, and I regret not doing that. 

But—— 

Senator GRASSLEY. Thank you for that statement. Now, who told 

you at ATF and the Attorney General’s office that these allegations 

were untrue? 

Mr. BREUER. Well, Senator, at the time, as I recall, we first 

spoke to the ATF back in April of 2010, my front office did. And 

based on what I understood, we had an understanding from the 
11 

ATF that this practice of 2006 and 2007, that the ATF understood 

the seriousness of that, and—— 

Senator GRASSLEY. What is that individual’s name? 

Mr. BREUER. Well, this clearly, as far as I know, Senator Grassley, at the time Mr. Hoover, who is the Deputy, was one of the people who would have been involved in that discussion. Of course, I 

was not there for it, so I can only tell you my understanding. And 

then, of course—— 

Senator GRASSLEY. That is all I want is your understanding of 

it. 

Mr. BREUER. That is my understanding, Senator. Then, of course, 

Senator, in early this year when this matter came to life, and the 

ATF agents made the claims that they did, I recall that both the 

leadership of ATF and the leadership of the United States Attorneys Offices in Arizona, those, of course, who were closest and were 

handling the matter, were adamant about the fact that this was 

not, in fact, a condoned practice. I am sure you recall that as well. 

Senator GRASSLEY. The word ‘‘leadership’’ applies then to the 

people that were head of the U.S. Attorney’s Office and the head 

of ATF. Even though you did not give me their names, that is who 

you are talking about, right? 

Mr. BREUER. That is exactly right, as I recall. 

Senator GRASSLEY. Let me go on then. 

Mr. BREUER. Yes, Senator. 

Senator GRASSLEY. On February 4, 2011, the Department sent 

me a letter also assuring me that allegations of gun walking were 

untrue. It reads, ‘‘ATF makes every effort to interdict weapons that 

have been purchased illegally and prevent their transportation to 

Mexico.’’ That statement is absolutely false, and you admitted as 

much last night, that you knew by April 2010 that ATF walked 

guns in Operation Wide Receiver. That is correct, yes? 

Mr. BREUER. Yes, Senator. What I—— 

Senator GRASSLEY. That is all I need to know, if that is correct. 

Did you review that letter before it was sent to me? 

Mr. BREUER. Senator, again, I just want to be clear that, as I 

told you a moment ago, I regret that in April of 2010 that I did 

not draw the connection between Wide Receiver and Fast and Furious. And, moreover, I regret that even earlier this year I did not 

draw that connection. 

In direct answer to your question, Senator, I cannot say for sure 

whether I saw a draft of the letter that was sent to you. What I 

can tell you, Senator, is at that time, I was in Mexico dealing with 

the very real issues that we are also committed to. But I also regret, as I have said, that I did not draw that connection earlier. 

Senator GRASSLEY. After learning of gun walking in Wide Receiver, did you ever information Attorney General Holder or Deputy Attorney General about it? And if so, when? And if not, why 

not? 

Mr. BREUER. Senator, I cannot be more clear. I have said to you, 

and I will continue to, I regret the fact that in April of 2010 I did 

not. At the time I thought that dealing with the leadership of ATF 

was sufficient and reasonable, and, frankly, given the amount of 

work I was doing at the time, I thought that that was the appropriate way of dealing with it. But I cannot be more clear that 
12 

knowing now—if I had known then what I know now, I, of course, 

would have told the Deputy and the Attorney General. 

Senator GRASSLEY. Did you ever tell anybody else in the Justice 

Department leadership the same thing? And if so, who and when? 

Mr. BREUER. Senator, I thought we had dealt with it by talking 

to the ATF leadership. 

Senator GRASSLEY. OK. How many guns were walked in Wide 

Receiver? 

Mr. BREUER. Well, Senator, I can probably try to look at that. Of 

course, that was in 2006 and 2007. And just to be clear, if I may, 

Senator, that was a case that had been abandoned and had languished. It was my Division that decided to take the case where 

guns had been permitted to go to Mexico years earlier and at least 

make sure that the criminals who were responsible for purchasing 

those guns were held to account. As a result of that, Senator, we 

prosecuted 11 different people. I think, to answer your question, in 

total, if my math is good, probably about 350 or so. But, Senator, 

I will have to double-check that number. 

Senator GRASSLEY. OK. I think you are very close, so you do not 

have to check that number. According to my information, just five 

straw buyers—and I will refer to the chart here, and then I will 

quit and let you go on to another member, and I will do some more 

in a second round. According to my information, just five of the 

straw buyers in Fast and Furious were allowed to buy nearly 1,000 

weapons. When did you first know that guns were walked in Fast 

and Furious? 

Mr. BREUER. Senator, I found out first from the public disclosures made by the ATF agents early this year. When they started 

making those public statements, of course, at that point, as you 

know, both the leadership of ATF and the leadership of the U.S. 

Attorneys Offices adamantly said that those allegations were 

wrong. But as those allegations became clearer, that is when I first 

learned that guns that could—that ATF had both the ability to 

interdict and the legal authority to interdict, that they failed to do 

so. And that is when I first learned that, Senator. 

Senator GRASSLEY. Thank you, Mr. Breuer. 

Mr. BREUER. Thank you, sir. 

Senator GRASSLEY. Thank you, Mr. Chairman. 

Chairman WHITEHOUSE. I will next call on Senator Feinstein, 

who not only brings to this concern her distinguished service of this 

Committee, but her service as Chair of the Senate Intelligence 

Committee. Senator Feinstein? 

Senator FEINSTEIN. Thank you very much, Mr. Chairman. I appreciate that. 

Mr. Breuer, in June of this year, I received a letter from BATF— 

this was in response to a letter I had asked them—from Acting Director Melson stating that 29,284 firearms recovered in Mexico in 

2009 and 2010 and submitted to the ATF Tracing Center, with 

those weapons 20,504, or 70 percent, were United States sourced. 

The country of origin for the remaining firearms apparently could 

not be determined by ATF, meaning that the number could be 

much higher. 
13 

What actually is the number? Now, this was back in June. Is 

that the most current number? Is it fair to assume that 70 percent 

of the firearms showing up in Mexico are from the United States? 

Mr. BREUER. Thank you, Senator, for the question and for your 

leadership on this issue. You have, of course, identified the paramount issue that we have to face as we deal with transnational organized crime from the Mexican cartels. From my understanding, 

94,000 weapons have been recovered in the last 5 years in Mexico. 

Those are just the ones recovered, Senator, not the ones that are 

in Mexico. And of the 94,000 weapons that have been recovered in 

Mexico, 64,000 of those are traced to the United States. We have 

to do something to prevent criminals from getting those guns, Senator, and that is my understanding of the most accurate numbers. 

Senator FEINSTEIN. Well, you see, this is a deep concern for me, 

and I know others disagree, but we have very lax laws when it 

comes to guns. And I think this to some extent influences BATF 

in how they approach the problem as to whether they have political 

support or not. But I think these numbers are shocking, and I 

think when you know the number of deaths these guns have 

caused, used by cartels against victims, it is literally up in the tens 

of thousands. So the question comes: What can we do? And I would 

really rather concentrate on the constructive rather than other 

things, and so the question comes: Do you believe that if there were 

some form of registration when you purchase these firearms, that 

would make a difference? 

Mr. BREUER. I do, Senator. Senator, we are talking today about 

transnational organized crime, and your leadership and the Chairman’s and other Senators’ shows that information is the tool we 

need to challenge and defeat organized crime. Today, Senator, we 

are not even permitted to have ATF require reports about multiple 

sales of long guns, of any kind of semi-automatic weapon or the 

like. So the ATF is unable to get that in all States. Very few hunters in the United States, or sports people, law-abiding people, really need to have semi-automatic weapons or long guns. So today if 

I go into a dealership and I want to buy 50 or 60 semi-automatic 

weapons, there is nothing that requires that to be in any way notified to ATF. Without that kind of notification, we lose track and 

can lose track of these kinds of potent weapons, and that is just 

one example of the kind of tool that I think would empower ATF 

and law enforcement to help fight this scourge. 

Senator FEINSTEIN. My concern, Mr. Chairman, is there has been 

a lot said about Fast and Furious, and perhaps mistakes were 

made. But I think this hunt for blame does not really speak about 

the problem, and the problem is anybody can walk in and buy anything, .50-caliber weapons, sniper weapons, buy them in large 

amounts, and send them down to Mexico. So the question really 

comes: What do we do about this? I have been here 18 years. I 

have watched the BATF get beaten up at every turn in the road. 

And, candidly, it is just not right. 

We have more guns in this country than we have people, and 

somebody has got to come to the realization that when these guns 

go to the wrong places, scores of deaths result, and that is exactly 

the case with the cartels. 
14 

So you are saying today that, if I understand this, over 5 years 

in recovered weapons there were 94,000; 64,000 of those came from 

the United States. So, clearly, over two-thirds of the weapons used 

in Mexico by cartels are coming from the United States. 

Mr. BREUER. That is correct, Senator. And just to make a point 

of that, in Wide Receiver, which was a matter where the guns were 

permitted to go to Mexico during the prior Administration, in the 

years 2006 and 2007, when my team discovered that, we decided 

we had to prosecute that case, because even though years and 

years earlier the guns had gone to Mexico, we had to hold the people who bought those guns responsible. And so we prosecuted those 

people, as Senator Grassley pointed out. 

But it is clear that we need more tools to get those people who 

are buying the guns and illegally transporting them to Mexico. We 

cannot permit the guns to go knowingly, and we cannot permit the 

guns to go unknowingly. We need to stop the flow. 

Senator FEINSTEIN. A last question. What would be the No. 1 tool 

that would be of help to you? 

Mr. BREUER. Well, I think that the No. 1 tool would be if ATF 

were given the ability to know when guns are purchased. Frankly, 

I do not know if it is the No. 1 tool, but one of the issues we are 

asking for in connection with the legislation we are talking about 

today, is the ability to forfeit the weapons and the inventories of 

gun dealers who knowingly sell their guns to criminals, if we could 

forfeit the guns of the dealers who we can prove knowingly are selling to criminals. We do not want to do anything to people who are 

selling to law-abiding citizens. But we have to stop these dealers 

from selling to criminals. 

Senator FEINSTEIN. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman WHITEHOUSE. Senator Coons. 

Senator COONS. Thank you, Chairman Whitehouse, and thank 

you for convening this important hearing. 

Let me start, if I could, Mr. Kibble, with some of the things you 

mentioned in your testimony, and the whole panel did, that 

transnational organized crime has broadened from its traditional 

areas of narcotrafficking, gun running, bribery extortion, into perhaps less obvious or less well expected areas—identity theft, cyber 

crime, intellectual property crimes, and counterfeiting. A whole series of recent articles have documented how in Mexico nine out of 

ten DVDs are pirated, and so blatantly so that most of them are 

stamped with the insignia of La Famiglia or Los Zetas, who are 

two of the notorious drug cartels. And according to a 2009 RAND 

report, gangs in Mexico are turning to DVD piracy because it provides a huge profit margin, very low risk compared to other criminal enterprises. 

What can we do that we are not already doing? What additional 

resources might we be able to offer, legal or otherwise, to strengthen our enforcement activities and to get our allies and partners 

around the world to join us in combating pirated DVDs or counterfeiting in pharmaceuticals or other areas that have a high profit 

margin but currently very low risk? 

Mr. KIBBLE. Senator, the trend that you correctly describe, we 

see this—whereas before we had transnational criminal networks 
15 

that maybe focused on one specific commodity, we see this diversification, and we have seen that with the Mexican cartels as well. 

Intellectual property theft is very attractive, as you noted, because 

the sentencing exposure is fairly low given the profit potential that 

can be gained by moving these counterfeit commodities. 

So what we are doing is we are trying to partner internationally 

with our partners in Mexico to share information to aid in the 

interdiction of copyrighted material or infringed material. What 

would be helpful is, because a lot of the ways we build these cases 

to get cooperating defendants, so the extent that we can have more 

significant penalties that help to encourage cooperation, that helps 

us to work up to the higher echelons of organizations that are engaged in counterfeiting. 

Senator COONS. I noted that was one of the principal recommendations and something I look forward to working with the 

Chairman on. 

Mr. Glaser, in your testimony—I want to start by commending 

your work in combating the financing of transnational crime and 

terrorism in particular. You mentioned the Financial Action Task 

Force is planning on releasing new international standards regarding beneficial ownership, I think early next year. And during the 

comment period, many of the stakeholders, the American Bar Association, European Bar Association, British Bar Council, National 

Association of Secretaries of State, shared a concern they were not 

being meaningfully consulted, and that concerns me because if you 

are not actively consulting the Secretaries of State and the folks 

mostly in the bar who will be required to partner to administer and 

comply with the new beneficial ownership standard, I think we run 

the risk of creating a standard that works great on paper but bogs 

down in the real world and might potentially put needless regulatory burdens on small business that do not achieve your real 

goals. 

Do you agree that the FATF should work closely with those who 

would be responsible for implementing its new guidance? And what 

is Treasury doing to improve that collaboration and consultation in 

advance of a new rule? 

Mr. GLASER. Thank you, Senator. I certainly agree that it is extremely important that the FATF consult with the private sector 

and take very seriously the views articulated by the private sector. 

As you point out, after all, the private sector really serves as a reality check for the types of things that are going to work and that 

are not going to work, what is going to be unduly burdensome, and 

they also have just some good ideas about how to make things go 

forward. 

I do think the FATF consults—and I know that the standards 

that you are referring to and that I referred to in my testimony are 

scheduled to be released I believe in February of 2012, February 

of next year, and in advance of that there is formal private sector 

consultations that the FATF does. 

What I think is even more important for the U.S. private sector 

is the consultations that they do directly with us, with the U.S. 

Government, because at the end of the day the international the 

District are implemented through governments. So what is going to 

apply to them is going to be the regulations and the laws and the 
16 

policies that we adopt in the United States. That is why, you know, 

in working—you mentioned beneficial ownership in particular. We 

have been working very closely with Congress, with Senator Levin 

in particular, and I know Senator Grassley has also cosponsored 

the beneficial ownership legislation. This has been a multi-year 

process where we have been working very closely with the Secretaries of State of the States and with the private sector to try to 

understand how this company or corporation process works and 

how we can make it work as a practical matter. So I do think all 

of that is important, and that is what we are working very hard 

to do. 

Senator COONS. Thank you. Given the short period until those 

rules come out, I would just urge some renewed consultation with 

those who do this professionally or as they are elected. 

Madam Chair, if I might, one last question? 

Senator FEINSTEIN. [presiding.] Please go ahead. 

Senator COONS. If I might, Mr. Breuer, the broader context we 

are talking about here was how bribery and narcotrafficking, IP 

counterfeiting, identity theft, and so forth are—the expanded the 

reach of transnational organized crime has, as your early comments suggested, expanded its previous scope to the point where 

even some nation states are thoroughly compromised. Later today 

I will be chairing a hearing on China in Africa and how the economic and political situation on the continent of Africa, mostly SubSaharan Africa, has changed fundamentally. There are real challenges with counterfeit products, with transparency, with the trafficking of drugs and human trafficking throughout Africa. Any comment for me in that context about how we see transnational organized crime beginning to affect the stability of partner allied states 

on the continent of Africa? 

Mr. BREUER. Absolutely, Senator, and thank you for what you 

are doing in this area. We have to be very nimble and understand 

that those countries that are under economic duress or those countries that have less stable governments or newer governments are 

going to be less able to resist the ever strengthening role of organized crime. Earlier this year, along with an Assistant Secretary of 

State, I was honored to lead a delegation. We went to Liberia and 

to Ghana, and we spoke to leaders in both of those countries about 

this very issue. 

We have to be careful that Western Africa and other regions do 

not become beachheads for the cartels. They take their drugs and 

their other products and try to use different places around the 

world for staging areas. We have to be partners with them. In Liberia I was fortunate enough to see the beginning of a coast guard 

that we are helping to build there. Well, that is essential, because 

i they themselves can begin in a meaningful way to police themselves, they can do a better job of fighting organized crime. And so 

I think we have to be nimble and we have to continue to develop 

partnerships throughout. 

Senator COONS. Thank you. 

Senator FEINSTEIN. Thank you very much. 

Senator Klobuchar. 

Senator KLOBUCHAR. Thank you. Thank you very much, all of 

you, for being here for this important topic. I know that Senator 
17 

Coons raised the issue of intellectual property theft. It is an issue 

which I have been very focused on, and not just with the DVDs 

that Senator Coons mentioned but also with theft over the Internet. And I think people do not often realize the relationship between these kinds of thefts and organized crime. So I wondered, 

Mr. Breuer, if you could talk about what types of intellectual property have been targeted by organized crime groups and what we 

can do to better prevent such crimes. 

Mr. BREUER. Well, Senator, we very much think that 

transnational organized crime today, as you have identified, is absolutely challenging intellectual property and is using computers 

and is expanding around the world. 

What we have to do is we have to have more tools. We have to 

empower us, as we have asked to be able to bring racketeering 

cases, RICO cases against organizations, and to have more of an 

international reach in doing that, because these are sophisticated 

organizations. 

I was just in Romania last week, as I mentioned, and the very 

issue you are identifying is one that we talked a lot about, because, 

of course, groups in those kinds of countries through computers 

and others are stealing the intellectual property of the United 

States. 

But we are bringing many, many cases in that area, and we are 

going to continue to do it. But using the racketeering powers that 

we have asked for, money laundering and forfeiture powers, and 

enabling us to continue to have countries around the world join 

international conventions, is the way for us to work hard in this 

area. 

Senator KLOBUCHAR. I have always believed that our laws and 

our prosecutors have to be as sophisticated as the crooks that are 

breaking them, and this is a whole new area, obviously, with the 

Internet and trying to make sure we maintain people’s freedom and 

their ability to put things up there, but at the same time are able 

to draw the line when actually it is for organized crime for commercial use for making money off it. 

In your written testimony, you propose strengthening criminal 

penalties for violation of IP law and focus on those that involve the 

conscious or reckless risk of death or bodily injury. Can you give 

us an example of what the Department of Justice has dealt with 

with such a scenario as that? 

Mr. BREUER. Absolutely, Senator. Time and again, even in the 

last couple of years, we have been bringing cases where individuals 

have taken counterfeit products and have tried to sell them to our 

military—that is one of the large categories—have tried to deal 

with the infrastructure of our United States—that is another major 

category—or have dealt with pharmaceuticals or products that we 

ingest. Those cases, just in the last year, I think, are at an all-time 

high, and if I were to generalize, they are exactly that: whether 

they are trying to counterfeit Cisco products and have them sold 

for our military air force or our computers, whether people are taking products that go to our computer systems more generally, we 

have tried as hard as we can to prosecute those crimes. But we 

think we need enhanced tools, and we are hopeful we can get them. 
18 

Senator KLOBUCHAR. Very good. And you are aware of the two 

bills that we have been focusing on in the Judiciary Committee 

which is, first of all, the rogue website bill, which allows the Justice Department to take down websites that meet very high criteria—the criteria is that it is being used to steal things, basically—and also to make the felony penalties the same as people 

selling DVDs on the corner, which Senator Coons had brought up. 

Correct? 

Mr. BREUER. Yes, Senator, I am, and we are very supportive of 

exactly those kinds of provisions and trying to have as comprehensive an approach as we can have. 

Senator KLOBUCHAR. Thank you very much. 

Did you want to add something, Mr. Kibble? 

Mr. KIBBLE. Senator, I just wanted to say those tools are going 

to be very important for stepping up our fight on online IP theft. 

But I would say there are some interesting things that we are 

doing already in terms of we are up to now about 200 domain 

names that have been seized using existing authorities, and what 

we are doing with that is we are posting seizure notices. And what 

we have found is, in partnering with industry, that they have told 

us that a number of folks that are operating illicit websites that 

are used to distribute counterfeit merchandise, 80 of them have 

unilaterally taken down websites. We also have forfeited about 86 

of those 200, and we use that to route people who go to those sites 

to a public service announcement that talks about how it impacts 

the American economy in terms of participating in intellectual 

property theft. 

But these tools that have been proposed in the legislative package are going to be important for staying up as the bad guys adapt. 

Senator KLOBUCHAR. Thank you very much. I appreciate it. 

Senator FEINSTEIN. The vote has begun. Senator Whitehouse has 

gone to vote, says he will be right back, and so he wants to continue this, so I will continue on. 

Last month, I authored with Senator Grassley the Targeting 

Transnational Drug Trafficking Act. This essentially strives to 

strengthen extraterritorial law. Among its provisions, the bill creates penalties for extraterritorial drug-trafficking activity when individuals have reasonable cause to believe that illegal drugs will be 

trafficking into the United States. Now, current law says that drug 

traffickers must know that illegal drugs will be trafficked to the 

United States. So what we have done is essentially lower the 

knowledge threshold to reasonable cause to believe. 

I would like to get each one of your views on that. 

Mr. BREUER. Senator, your legislation, your proposed legislation 

here, and Senator Grassley’s, is essential. Right now, as we have 

talked about, these transnational organized crime groups are very 

sophisticated and can be very segmented. So you can have an outfit 

in South America, in Colombia, you can have a separate outfit that 

is simply responsible for the transmission of the drugs in a certain 

area or for a certain ingredient. And right now, you are absolutely 

right, to prosecute you we have to prove that you knew that the 

drugs were going to the United States. 

What we want to do is exactly what you say, and it will be an 

enormous tool. If you had reasonable cause to believe that the 
19 

products were going to the United States—and we do not have to 

prove that you individually knew it—that will be an enormous tool 

in us prosecuting the cartels. And more to the point, if you are part 

of a conspiracy and we can prove that one member of the conspiracy had reasonable cause to believe the product was going to 

the United States, that will be a tool that will enable us to go after 

all the conspirators, and it is essential in our fight against organized crime and against these cartels. So we could not be more supportive, Senator. 

Senator FEINSTEIN. Thank you very much. 

Do you differ from that, Mr. Glaser or Mr. Kibble? 

Mr. GLASER. No, Senator. 

Mr. KIBBLE. No, Senator. 

Senator FEINSTEIN. Thank you. I better go vote, Senator. 

Chairman WHITEHOUSE. Yes. First of all, Senator Feinstein, 

thank you very much for stepping in as Chair for me. As I think 

the witnesses are aware, we are now in a voting sequence in the 

Senate, and so Senator Grassley and I have made the mad dash 

back and forth to vote in order to be here for a second round. I 

have to say, he was quite something to keep up with. 

Senator Grassley. 

Senator GRASSLEY. Thank you. 

Mr. Breuer, I think this will be my last round of questioning. 

Were you aware at the time that Deputy Attorney General Gary 

Grindler was briefed on Operation Fast and Furious in March of 

2010? 

Mr. BREUER. Senator, I do not believe that I was briefed on Operation Fast and Furious, and, Senator, I do not believe that I was 

aware of that briefing. 

Senator GRASSLEY. OK. In December 2009, Director Melson 

asked you to assign a prosecutor to the case from headquarters, 

and in March 2010, a prosecutor from the gang unit was assigned 

to Fast and Furious. Why did the No. 2 official in the Justice Department get a briefing around the same time headquarters assigned a prosecutor to Fast and Furious? 

Mr. BREUER. Senator, I cannot answer that. What I can say to 

you is, from the very beginning of my tenure as the Assistant Attorney General, I have been very committed to doing everything we 

could to fighting the drug cartels and to doing what we can to stop 

what they are doing. It was in that vein that I offered the southwest borders whatever help we in the Criminal Division could 

bring, and that is how the very issues you are raising came about. 

But I cannot tell you anything about the briefing because I simply 

did not participate in it. 

Senator GRASSLEY. OK. You said that when you first learned 

about gun walking in Wide Receiver, you instructed one of your 

deputies to schedule a meeting with the ATF Acting Director to 

‘‘bring these issues to their attention.’’ When you first learned 

about gun walking in Fast and Furious, did you do the same thing? 

And if not, why not? 

Mr. BREUER. I did not, Senator, and that is what I regret. 

Senator GRASSLEY. OK. Was the deputy who you assigned to 

meet with ATF, Jason Weinstein, also responsible for authorizing 
20 

any of the applications to the court for wiretaps in Fast and Furious? 

Mr. BREUER. Senator, the answer is, he and other deputies in my 

office, including the longest-serving deputy in the United States’ 

history, who has served for almost 60 years, did. If I may, Senator, 

for a moment, I would like to explain what that role is, if you 

would permit me. 

The Congress made clear in law that wiretaps on telephones are 

an extraordinarily intrusive technique. They are a technique that 

I support fully and that I think are essential in fighting organized 

crime and transnational organized crime. And they are why, Senator, in my 21⁄2 years I have over tripled the number of reviewers 

who do it. But as Congress made clear, the role of the reviewers 

and the role of the deputy in reviewing Title III applications is only 

one. It is to ensure that there is legal sufficiency to make an application to go up on a wire and legal sufficiency to petition a Federal 

judge somewhere in the United States that we believe it is a credible request. But we cannot—those now 22 lawyers that I have who 

review this in Washington, and it used to only be 7 cannot and 

should not replace their judgment, nor can they, with the thousands of prosecutors and agents all over the country. Theirs is a 

legal analysis: Is there a sufficient basis to make this request? We 

must and have to rely on the prosecutors and their supervisors and 

the agents and their supervisors all over the country to determine 

that the tactics that are used are appropriate. 

Senator GRASSLEY. Thank you for that explanation. 

You said in your statement last night that you ‘‘did not draw a 

connection’’ between gun walking in Wide Receiver and gun walking in Fast and Furious. You also said that you regret your failure 

to ‘‘alert others within the Department leadership’’ of similarities. 

What finally made the light bulb go on for you that the two cases 

had similar problems? 

Mr. BREUER. Senator, thank you for that question. I hope you 

know, Senator, that I have tried and my Division has tried as comprehensively as we can to deal with the plight of Mexico. I am 

proud to say, Senator, that it is my Division that is prosecuting the 

thugs and criminals who killed the three U.S. consulate officials in 

Juarez. It is my Division that is responsible for the investigation 

right now of the murderers of ICE Agent Zapata and the shooting 

of Avila. And it is my Division, working with law enforcement, that 

has brought 104 Mexican criminals, cartel leaders and the like, including Benjamin Arellano Felix, to justice this year in the United 

States. 

So every day, whether it is an organized crime or white-collar 

crime or cyber crime case we are working, there is absolutely no 

question, Senator, that as I was involved in this exercise and as all 

of this has come to light, that I, in thinking about it, realized that 

I should have back in April of 2010 drawn that connection. I have 

expressed that regret personally to the Attorney General of the 

United States, and then I determined that I should do it publicly 

as well. 

Senator GRASSLEY. I have just three short questions, Mr. Chairman. When did you finally alert others within the Department 
21 

leadership about the similarities that I just described? And who did 

you alert? 

Mr. BREUER. Senator, I cannot anymore recall because, of course, 

by the time that the connection is drawn with me—— 

Senator GRASSLEY. That is OK. How did you first hear about 

Fast and Furious? 

Mr. BREUER. Well, I first heard about the tactics about guns 

being permitted to go to Mexico when ATF had both the legal authority to interdict them and the ability to interdict them, I first 

heard of those allegations when the ATF agents went public. 

Senator GRASSLEY. OK. And then when and how did you first 

learn about the connection between Fast and Furious and U.S. Border Patrol Agent Brian Terry’s murder? 

Mr. BREUER. Senator, Border Patrol Agent Brian Terry’s murder 

is an absolute horrible tragedy, as are the tragedies of the other 

people, law enforcement and others, who have been killed. The only 

way I learned about any connection there was when it became public. But, of course, as you know, Senator, with respect to many of 

these tragedies, my Division has done everything we can to hold 

the people liable. When CBP Agent Rosas was killed, I worked personally, tirelessly, to bring his murderer to the United States. I attended the funeral. I spent time with his family. And that is why 

we are working tirelessly to hold the murderers of Agent Zapata 

accountable and the murderers of the consulate officials accountable. 

Senator GRASSLEY. Mr. Chairman, I have a request of you. I released a report that I would like to ask be made a part of the 

record. It refutes the numbers referenced earlier that 70 percent of 

the guns in Mexico came from the U.S. The answer is not to clamp 

down on law-abiding citizens or gun dealers. Would you include 

that in the record? 

Chairman WHITEHOUSE. Without objection, the report will be included in the record. 

[The report appears as a submission for the record.] 

Senator GRASSLEY. Thank you, Mr. Chairman, and thank you, 

Mr. Breuer, for your comments. 

Mr. BREUER. Thank you, Senator. 

Chairman WHITEHOUSE. Thank you, Senator Grassley. 

We will wind up the hearing now because the votes are underway and we have, I think, six remaining, so I do not think I can 

manage to continue, plus we are now through a second round. But 

I did want to go back to the point that I raised initially and ask 

each of you, obviously briefly, you are all law enforcement professionals—for you this is a practical problem—evaluate for us and for 

those who will be listening to this record how and how much a case 

is complicated by having an international component. There is the 

initial investigative piece of tailing suspects and getting subpoenas 

for evidence and doing witness interviews, and that is a kind of 

traditional investigative piece. There is the electronic piece of trapand-trace, pen register, wiretap authority. There is often a third 

scientific piece of putting together forensic evidence, whether electronically or, you know, rebuilding a crime scene or reconstructing 

a fire or something like that. Then there is the question of getting 

access to the criminals themselves, the arrest and seizure of the in-
22 

dividual. And, finally, there are the asset protection and ultimately 

forfeiture and seizure parts of trying to make sure that the proceeds and instruments of the crime are claimed and seized by our 

Government. 

If you could kind of walk us through a hypothetical case and in 

those five areas, if there are a couple where you have a particular 

specialty and you want to pass off others so we are not repeating 

ourselves too much, I will leave that to you to sort out. But I would 

like to kind of leave this hearing with a flavor for exactly how what 

could already be a very complicated case in the United States 

under U.S. law with our existing procedures and protocols becomes 

exacerbated as a challenge when it has an overseas component. Mr. 

Breuer, I will let you go first. 

Mr. BREUER. Senator, I will take a try at that. In a typical case 

we may receive some sort of complaint from some sort of an entity. 

Maybe it is identity fraud, maybe it is online fraud, it could be 

really anything. So the first thing we have to do is try to investigate that allegation. Perhaps we will try to trace whatever information we can. Maybe we will try to find whether an online vendor 

or a money transmitter or someone has been involved. 

It may turn out that we will try to run the names through something that this Administration started, which is called IOC–2. It is 

a data base where we now try to get from all of law enforcement, 

whether from Treasury, from ICE, from wherever we can, information to see if we can find other touches throughout. 

But then we may need to get foreign evidence. Our foreign partners vary. Some, like Romania, where I was last week, are very, 

very strong, and they are happy to exchange information, and they 

work well with us. But, frankly, others will not share information. 

If we need it in court, we have to go through the court system and 

do what is called a mutual legal assistance treaty, and we have to 

get it that way. That can take months and months, if not years. 

We can sometimes follow very byzantine kinds of procedures that 

we have to do. 

Chairman WHITEHOUSE. Something as simple as having an agent 

tail somebody is—— 

Mr. BREUER. Right, I have to get—— 

Chairman WHITEHOUSE. At the agent level here, an agent and a 

supervisor will decide to do it based on a case. That is something 

you and the Department of Justice will never see. The U.S. Attorney might not even see it themselves in the local office. That would 

be really where-the-rubber-meets-the-road investigative determination, and there would be virtually no administrative burden or complexity to getting clearance to accomplish that task. You want to 

tail the same person, and you used the example of Romania, what 

is—— 

Mr. BREUER. We have to get the Romanian authorities to agree 

to do that. We have to work with them, and they have to be willing 

to do it, and it is enormously difficult. Not only is that difficult—— 

Chairman WHITEHOUSE. Trap-and-trace. 

Mr. BREUER. Right. I mean, we—— 

Chairman WHITEHOUSE. I mean, compare trap-and-trace. 

Mr. BREUER. Well, I mean, in the United States we are able to 

do that with some efficiency. In countries around the world, there 
23 

is the entire gamut of what we are allowed to do with respect to 

telephonic and other kinds of information. Some countries will do 

it somewhat easily. Other countries will almost never do it. Some 

countries, for instance, if we identify the criminals, will never extradite their nationals. So with impunity, unless that country is 

willing to prosecute the person, we cannot do it. 

These are very huge problems, and that is why—— 

Chairman WHITEHOUSE. Unless you can lure them overseas. 

Mr. BREUER. Unless we can lure them overseas. That is exactly 

right. And that is a very difficult issue. We do it, as you know, but 

that can also have international ramifications. And so it is something we do only after much consideration. 

Chairman WHITEHOUSE. From a Treasury point of view, Mr. 

Glaser, in terms of asset forfeiture and seizure of goods, again, a 

couple of practical comparisons, if you could, on how the international element of one of these investigations adds to the burden 

and challenge that you have to face compared to a pure domestic 

case. 

Mr. GLASER. As has been alluded to a number of times, the international financial system is seamless, it is borderless, it is instantaneous. And people who are operating within the international financial system do so in that environment. So the challenge that we 

have is that, unfortunately, governments are not borderless, governments are not instantaneous, governments are not seamless. We 

have to operate through treaties; we have to operate through mutual legal assistance agreements, through information sharing and 

other types of information-sharing agreements. 

What our challenge is, at the Treasury Department what we try 

to do with respect to the international financial system is make it 

as transparent as possible so that the investigators and the prosecutors that Lanny works with on a daily basis have the opportunity to trace through the international financial system where 

the information is, and really even more fundamentally to make 

sure that the information is there in the first place, to make sure 

that financial institutions are asking the right questions and keeping the right records so that when there is a mutual legal assistance request that can be made, that the information is there in the 

first place. 

I think the biggest challenge we have now, as I said in both my 

written and oral testimony, is with respect to corporate vehicles, 

with respect to companies, both domestically and internationally, 

and the use of companies to disguise the true parties to transactions. 

Chairman WHITEHOUSE. What we would call shell or phony corporations? 

Mr. GLASER. Front companies, shell companies, there are all different sorts. And it is not just necessarily companies. It could be 

trusts. But there are all sorts of non-transparent corporate vehicles 

that exist for perfectly legitimate reasons, and in no way certainly 

from the Treasury Department perspective do we want to interfere 

with how these corporate vehicles are used in legitimate commerce. 

But the fact is that they are also very useful to criminals, and I 

think there are some very common-sense things that we could do, 

again, both domestically and globally to ensure that when law en-
24 

forcement investigators and prosecutors need to know who is behind these transactions, that information is available to them. 

Chairman WHITEHOUSE. Thank you. 

Mr. Kibble. 

Mr. KIBBLE. I would just pick up on some of the same themes, 

Chairman. The nature of the transnational criminal threat has migrated to a very cellular structure so that frequently in our investigations, whether they are counterfeit pharmaceuticals or counterproliferation investigations, they involve multiple countries and 

multiple continents. And when you are trying to reduce that illicit 

flow across our borders, which is the perspective which ICE comes 

at it from, it is coordinating that effort in multiple countries. And 

getting back to the point that Mr. Glaser said, the agile nature of 

our adversary that does not respect our borders, it is fashioning 

structures and partnerships and information exchange frameworks 

that allow us to move every bit as nimbly. 

A good example in Mexico, during the course of our investigations along the southwest border, we will develop information that 

identifies sicarios, cartel hit men that are in houses across the border, and during the course of our investigations, we have been able 

to share that with partners in Mexico that we have cultivated that 

have arrested those assassins, that have seized grenades, that have 

seized weapons, and we need to build that across the entire illicit 

pathway, and that can be challenging, depending on the framework 

and the governance of the particular countries we are dealing with. 

So it is just trying to build the structure that allows us to act 

every bit as nimbly as the transnational criminal threat we face. 

Chairman WHITEHOUSE. Let me ask a final question, but I will 

make it a question for the record and you can get back to me. But, 

again, trying to be as practical about this as possible, as a U.S. Attorney, even if you have a relatively complicated case, the universe 

of folks that is involved in that case is your chain of command to 

the prosecutor who has been assigned it. It is the investigating 

agency, or in some cases agencies, but usually only two or three, 

and usually all, you know, ATF working with the FBI on a case, 

for instance, side by side, and so that is simple and within the district. You have the deconfliction to make sure that you are not 

doing something that somebody else is already into. And you have 

your relationship with the Department of Justice if it is a case in 

which the Department of Justice needs to sign off at various 

stages. That is kind of your universe for doing even a very complicated case. 

I would like to ask if you could pull together an example of an 

international case, maybe one that has been taken down, or maybe 

just pull the other hypothetical one, and lay out what the prosecutor in charge of that case is looking at in terms of not only their 

own chain of command to the prosecutor, not only the American domestic law enforcement investigative agency or agencies, but then 

the MLAT network, if it is not FBI, you have got to get the legats 

involved through the FBI. You have got an intelligence component 

to it often. You have to have a liaison with the local embassy. 

There is probably a Treasury component. 

I would like to kind of be able to almost construct kind of a diagram of what it takes to put all these agencies in the field to 
25 

mount a really effective international investigation and how much 

bigger an administrative group and reach that is than just plain 

for the same crime if it were entirely domestic. So if I could ask 

you to do that, is that all right? 

Mr. BREUER. Of course, Senator. 

Chairman WHITEHOUSE. Good. 

[The information referred to appears as a submission for the 

record.] 

Chairman WHITEHOUSE. Thank you very much. 

I will put the Attorney General’s letter to Chairman Issa and 

Chairman Leahy, which I do not think I have a date on, but it is 

the one that refers to Operation Fast and Furious—oh, there it is— 

the October 7, 2011, letter from Attorney General Holder to Chairman Issa, Chairman Leahy, and others, and without objection, that 

will be added to the record of these proceedings. 

[The letter appears as a submission for the record.] 

Chairman WHITEHOUSE. The hearing record will remain open for 

another week if anybody wants to add anything further. 

I will close by again thanking the witnesses for their dedication 

to keeping our country safe and to protecting us from the criminal 

threat that we have always faced, but the international criminal 

threat that we face now in, I think, unprecedented intensity and 

in unprecedented means. And your service to your country is much 

appreciated, and the hearing is adjourned. 

[Whereupon, at 10:51 a.m., the Subcommittee was adjourned.] 

[Questions and answers and submissions for the record follow.] 
26 

QUESTIONS AND ANSw,ERS 

Questions for the Records for 

Lanny A. Breuer 

Assistant Attorney GenerAl 

Criminal Division 

U.S. Department of Justice 

Subcommittee on Crimc and Terrorism 

Committee on the Judiciary 

United States Senate 

"Combating Intcrnational Organized Crime: Evaluating Current Authorities, Tools and 

Resources" 

November 1,2011 

Ouestions from Senator Patrick Leahy 

Question 1: 

During the hearing, you were interrupted as you attempted to answer a question 

from Senator Grassley. Would you like to complete your answer? The question is 

below: 

Senator Grassley. On J<'ebruary 4, 2011, the Department sent me a letter also 

assuring me that allegations of gun walking were untrue. It reads, "ATF 

makes every effort to interdict weapons that have been purchased illegally 

and prevent their transportation to Mexico." That statement is absolutely 

false, and you admitted as much last night, that you knew by April 2010 that 

ATF walked guns in Operation Wide Receiver. That is correct, yes? 

Mr. Breuer. Yes, Senator. 'What 1-

Senator Grassley. That is all I need to know, if that is correct. 

Response: 

Thank you for the opportunity to eomplete my response. 

In April 20 I 0, one of my Deputy Assistant Attorneys General (DAAG), Jason Weinstein, 

informed me about certain misguided taetics that had been used in Operation Wide 

Receiver in 2006 and 2007, which had resulted in the ATF losing control of guns that 

then crossed the border into Mexico. DAAG Weinstein became awarc of these 

misguided tactics in the course of his supervision of the Criminal Division's Gang Unit, 

which had agreed, in September 2009, to assume responsibility from the United States 

Attorney's Office in Arizona for prosecuting Operation Wide Receiver. 

1 
27 

When I learned of these misgnided tactics in April 2010, the operative phase of the Wide 

Receiver investigation was approximately four years old and had been complete for well 

over two years; the Acting Directors of the ATF in 2006 and 2007 - when Operation 

Wide Receiver was investigated - were no longer leading the ATF; and the U.S. 

Attorneys in Arizona in 2006 and 2007 whose Office handled Operation Wide Receiver 

until the Gang Unit became involved in 2009 were no longer leading the U.S. 

Attorney's Office. Once I became aware of the inappropriate tactics that had resulted in 

the ATF losing control of guns that then crossed the border into Mexico, I directed 

DAAG Weinstein to meet with the leadership of the ATF to convey my concerns about 

the investigation. Based on the mceting DAAG Weinstein subsequently had with the 

ATF's Deputy Director, I had no reason to believe that the new leadership of the ATF 

approved of, or that it would ever continue to endorse, the tactics that had been used 

years earlier in Operation Wide Receiver. In addition, after the allegations regarding 

Operation Fast and Furious became public, the leadership of both the ATF and the U.S. 

Attorney's Offiee in Arizona - who held supervisory responsibility for the investigation 

repeatedly and vigorously assured individuals throughout the Justice Department that 

those allegations were false. 

Based on the information I had at the time the Department sent its February 4, 2011 

letter, I had no reason to believe that the leadership ofthe ATF approved of, or that it 

would ever eontinue to endorse, the misguided taetics that had been used years earlier in 

Operation Wide Receiver, which had resulted in the A TF losing control of guns that then 

crossed the border into Mexico. In reeent weeks, I have seen reports suggesting that, 

during my November 1,2011 testimony, I acknowledged knowing that the February 4 

letter was inaccurate at the time it was submitted. I want to make clear that such an 

interpretation of my testimony is absolutely incorrect. I testified that, at the time the 

Department sent its February 4 letter, I did not make a connection between Operation 

Wide Receiver and the allegations being made about Operation Fast and Furious. But, as 

I have stated, knowing what I now know was a pattern ofunaceeptable and misguided 

tactics used by the A TF, I regret not having drawn a connection between the allegations 

relating to Operation Fast and Furious and the inappropriate tactics used years earlier in 

Operation Wide Receiver. 

Question 2: 

You testified that you regretted not alerting others in the Justice Department after 

you became aware, in April of2010, ofinvestigative tactics that were used in a 

previous ATF investigation entitled Operation Wide Receiver, which occurred in 

2006 and 2007. That testimony has been misconstrued by some as if about 

Operation Fast and Furious. When did you become aware of the unacceptable 

tactics being used in Operation .Fast and Furious? 

Response: 

I first became aware of allegations regarding the use of unacceptable tactics in Operation 

Fast and Furious when those allegations became public earlier this year. Before that 

time, I was unaware of any such tactics in connection with Operation Fast and Furious. 

z 
28 

Questions from Senator Charles Grassley 

Department Letter of February 4, 201[11 

Last week when asked whether you saw a draft of the February 4 letter sent to me 

that contained the false statement, "ATF makes every effort to interdict weapons 

that have been purchased illegally, and prevent their transportation to Mexico," you 

responded: "I cannot say for sure whether I saw a draft of the letter that was sent to 

you. What I can tell you, senator, is at that time, I was in Mexico dealing with the 

very real issues that we are all so committed to." 

Question 3(a): 

Did your Deputy Assistant Attorney General (DAAG) Jason Weinstein review the 

Department's February 4, 201 [1) letter to me? 

Response: 

Yes, DAAG Weinstein reviewed the letter; he also participated in its drafting. 

I understand from documents being produced by the Justiee Department, and from 

conversations I have had with DAAG Weinstein, that he offered to assist in drafting the 

February 4 letter because, having been unable to go on his planned trip to Mexico with 

me and other Department officials, he had the time to do so. I further understand that 

during the drafting process, hc rclicd on the unequivocal assertions of the leadership of 

the ATF and the Arizona U.S. Attorney's Office - officials who held supervisory 

rcsponsibility for Operation Fast and Furious and who were therefore in thc best position 

to know the actual facts eoneerning the operation. 

DAAG Weinstein has expressed to me that, in hindsight, he wishes he had not relied on 

those assertions and that, because he did rely so heavily on them, he viewed, incorrectly, 

the misguided taeties used in Operation Wide Reeeiver - which resulted in the A TF 

losing control of guns that then crossed the border into Mexieo as having no relation to 

the allegations that were being made about Operation Fast and Furious. 

Before joining the Criminal Division in 2009, DAAG Weinstein had been an Assistant 

United States Attorney (AU SA) for ten years, prosecuting violent and other criminals in 

Manhattan and Baltimore. He rose to beeome Assistant Criminal Chief and Violent 

Crime Chief in the Baltimore U.S. Attomey's Office, where he prosecuted some of 

Baltimore's most violent offenders and created thc Maryland Exile program, which 

contributed to a signifieant reduction in murders and shootings in thc Baltimore area. In 

2007, he and others received an award from the Justicc Department for having built the 

nation's best violent crime task force. In 2009, I selected Mr. Weinstein for his position 

as Deputy Assistant Attorncy General overseeing the Gang Unit and othcr Criminal 

Division sections because of his ycars of expcrience in fighting violent crime and because 

4 
29 

of his stellar reputation in the law enforcement community. He has made enormous 

contributions to the Division and to the Department over the past two-and-a-halfyears 

and during his long career with the Department. I consider him to be an extremely 

talented, ethical, and devoted prosecutor. 

Question 3(b): 

Who else in the Criminal Division reviewed the letter? 

Response: 

Based on the documents being produced by the Justice Department, it is my 

understanding that several individuals within the Criminal Division received drafts of the 

February 4 letter. However, I am not aware of anyone in the Division apart from DAAG 

Weinstein who participated in any meaningful way in drafting or reviewing it. 

Question 3(c): 

What were the dates you were in Mexico in late January and early February 20[l]? 

Response: 

I was in Mexico on an official visit from February 1-3, 20 II. 

Question 3(d): 

When did you first become aware that the Department denied in its February 4 

letter allegations that guns had been walked? 

Response: 

Like many others in the Department, I was aware, at the time, that the Department was 

drafting a response to your January 2011 letters and that officials at the ATF and the U.S. 

Attomey's Office in Arizona felt strongly that the allegations being made were untrue. I 

was also aware, like many others in the Department, that based on the unequivocal 

statements of the ATF and the Arizona U.S. Attomey's Office, the Department intended 

to deny the allegations. I did not, however, participate in drafting or editing the 

Department's February 4, 2011 letter. 

Based on the documents being produced by the Justice Department, I understand that two 

emails attaching drafts of thc lettcr wcre sent to me by DAAG Weinstein on February 2, 

while I was in Mexico, and that I forwarded onc of those emails to my personal email 

account on that day; I also understand that on February 4, after I had retumed from 

Mexico, I received two emails attaching signed versions ofthc letter, including the final 

version, and that on February 5, I forwarded both emails to my personal email account. 

However, as I testified, I cannot say for sure whcthcr I saw a draft of the letter before it 

5 
30 

was sent to you. I have no recollection of having done so and, given that I was on ofticial 

travel that week and given the scope of my duties as Assistant Attorney General, ! think it 

is exceedingly unlikely that I did so. 

In recent weeks, I have seen erroneous reports suggesting that, during my November I, 

20 II testimony, I acknowledged knowing that the February 4 letter was inaccurate at the 

time it was submitted. I want to make clear that such an interpretation of my testimony is 

absolutely incorrect. I testified that, at the time the Department sent its February 4 letter, 

I did not make a connection between Operation Wide Receiver and the allegations being 

made about Operation Fast and Furious. As I explain more fully in response to Senator 

Leahy's Questions for the Record, based on the information I had at the time the 

Department sent its February 4,2011 letter, I had no reason to believe that the leadership 

of the A TF approved of, or that it would ever continue to endorse, the misguided tactics 

that had been used years earlier in Operation Wide Receiver, which resulted in the A TF 

losing control of guns that then crossed the border into Mexico. But, as I have also 

stated, knowing what I now know was a pattern of unacceptable and misguided tactics 

used by the ATF, I regret not having drawn a connection between the allegations relating 

to Operation Fast and Furious and the inappropriate tactics used years earlier in 

Operation Wide Receiver. 

Connection Between Operation Wide Receiver and Operation Fast and Furious 

In your testimony of November 1, you stated: "I regret that in April of 2010 that I 

did not draw the connection between Wide Receiver and Fast and Furious." 

However, it is clear that at that time, your own staff considered them related 

components of the same case. 

On February 22, 2010, Gang Unit prosecutors Laura Gwinn and Joe Cooley, 

assigned respectively to Wide Receiver and Fast and .Furious, emailed back and 

forth with each other about the connection between the two cases when some of the 

guns being trafficked in Fast and Furious were tracked to a stash house of one of the 

targets in Wide Receiver. HOGR WR 003422. 

Because of those overlapping targets, Wide Receiver and Fast and Furious were 

considered associated cases. When the ATF Phoenix :Field Division assembled a 

PowerPoint presentation on Fast and Furious in March 2010, one of the slides 

listing" Associated Cases" with Fast and Furious listed Operation Wide Receiver. 

This same PowerPoint was presented at ATF headquarters on M.arch 5, 2010. 

HOGR ATF 002091. According to a M.arch ll, 2010, memo from Gang Unit Chief 

Kevin Carwile, Gang Unit member Joe Cooley attended that briefing. HOGR DOJ 

003311. 

Concerns about those overlapping targets also led to delay in unsealing the 

ndictments in Wide Receiver, as the U.S. Attorney's Office in Arizona had concerns 

that when the Wide Receiver indictments were unsealed it would tip off targets in 

6 
31 

Fast and Furious. As the Department wrote in its October 31, 2011, letter to 

Senator Leahy: "The documents produced today reflect that the Gang Unit 

prosecutor was ready to indict the Wide Receiver cases and unseal them beginning 

in the spring of 2010, but that the Assistant U.S. Attorney in the U.S. Attorney's 

Office in Arizona handling Fast and Furious believed that if the Wide Receiver 

indictments became public at that time they would negatively impact his case. The 

Assistant U.S. Attorney therefore requested that the indictments and/or the 

unsealing of the indictments in Wide Receiver be delayed. HOGR WR 003480, 

003489. As a result of that request, Wide Receiver 1 was indicted under seal in May 

2010, Wide Receiver 2 was indicted under seal in October 2010, and both cases were 

unsealed in November 2010. HOGR DOJ 003260, 63." 

In a July t, 2010, memo to DAAG Weinstein, Principal DAAG and Criminal 

Division Chief of Staff Mythili Raman, and Criminal Division Deputy Chief of Staff 

Steven FageU, the connection between Fast and Furious and Wide Receiver was 

referenced when Gang Unit Chief Kevin Carwile described "a gun trafficking case 

with apparent ties to the Tucson case already indicted by [the Gang Unit}." HOGR 

DOJ 003327. 

Finally, an October 18,2010, memo under your name that is addressed to the 

Attorney General and Acting Deputy Attorney General reads: "On October 27, the 

Organized Crime and Gang Section (OCGS) plans to indict eight individuals under 

seal relating to the trafficking of hundreds of firearms into Mexico. The sealing will 

likely last until another investigation, Phoenix-based Operation .Fast and Furious, 

"is ready for takedown." HOGR DOJ 003263. 

Question 4(a): 

In light of all of these connections, how is it credible for you to claim that you "did 

not draw the connection between Wide Receiver and Fast and Furious"? 

Response: 

None ofthe documents cited in your question indicates a connection between the 

misguided tactics used by the A TF in 2006 and 2007 in Operation Wide Receiver -

whieh resulted in the ATF losing control of guns that then crossed the border into Mexico 

- and any inappropriate investigative tactics being used in Operation Fast and Furious, 

and I was not aware of any such connection. 

Indeed, the fact that I did not connect what I knew about Operation Wide Receiver with 

the allegations relating to Operation Fast and Furious is perhaps best reflected in the 

reaction I had when I learned, in April 2010, of the unacceptable tactics used years earlier 

in Operation Wide Receiver that had resulted in the A TF losing control of guns that then 

crossed the border into Mexico namely, to ensure that the leadership of the ATF was 

promptly apprised of the misguided tactics used in the investigation, which had been 

conducted long before I became Assistant Attorney General and long before the Criminal 

7 
32 

Division assumed responsibility for prosecuting the Wide Receiver defendants. I am 

confident that had I drawn a conncction betwccn what I knew about Operation Widc 

Receiver and the allegations rclating to Operation Fast and Furious, I would have taken 

action. 

As I testified, knowing what I now know was a pattenl of unacceptable and misguided 

tactics used by the ATF, I regret not having drawn a connection between the allegations 

relating to Opcration Fast and Furious and the inappropriate tactics used years earlier in 

Operation Wide Receiver. 

Additionally, as I have explained more fully in response to Senator Leahy's Questions for 

the Record, based on the infonlmtion I had at the time the Department sent its February 4, 

2011 letter - including the infonlmtion that senior officials at the A TF and the U.S. 

Attorney's Office in Arizona, who held supervisory responsibility for Operation Fast and 

Furious, provided to the Department at the time - I had no reason to believe that the 

leadership of the ATF approved of, or that it would ever continue to endorse, the 

misguided tactics that had been used years earlier in Operation Wide Receiver, which had 

resulted in the ATF losing control of guns that then crossed the border into Mexico. 

Question 4(b): 

Since the Criminal Division believed in the spring of 20t 0 that both Wide Receiver 

and Fast and Furious involved overlapping targets, when you learned in April20tO 

that guns were walked in Wide Receiver, did you ask whether they were also walked 

in Fast and }<'urious? If not, why not? 

Response: 

Please sec response to Question 4(a) above. 

8 
33 

Question from Senator Amy Klobuchar 

Question 5: 

In connection with this hearing, the witnesses snbmitted written testimony which asserted a 

significant link between terrorism financing and transnational organized crime. A White 

House Fact Sheet from July 25, 2011 also asserted such a link, citing Department of Justice 

data on the matter. However, not aU statements from Administration officials have 

indicated there is a significant link. Please briefly clarify what you see as the level of 

coordination between terrorist financing and transnational organized erime. 

Response: 

The Department of Justice bclieves that a link exists between terrorist financing and 

transnational organized crime, and in particular between terrorist financing and international 

narcotics traffickers. Further, the potential for continued and increased overlap between these 

crimes and the entities that engage in them is substantial. Indeed, only days ago, on November 

15,2011, a defendant, Oumar Issa, a citizen of Maii, pleaded guilty in federal court in Manhattan 

to his role in transporting cocaine through West and North Africa with the intent to support the 

drug trafficking activities of al-Qa'ida, al-Qa'ida in the Islamic Maghreb, and the Revolutionary 

Armed Forces of Colombia (FARC). Each of these organizations has been designated by the 

U.S. Department of State as a Foreign Terrorist Organization. 

Transnational organized crime groups can, and do, offer illicit goods and services vital to 

terrorist operations -including false identifications and travel documents and weapons. These 

groups are also available to smuggle aliens and launder funds for terrorists. Among other means, 

international narcotic trafficking groups have transferred funds to terrorist organizations through 

international banking channels. In February 2011, the DEA and the Department of the Treasury 

obtained evidence that The Lebanese Canadian Bank SAL and its subsidiaries (LCB) facilitated 

the money laundering activities of an intemationalnarcotics trafticking and money laundering 

network and, as a result, identified LCB as a financial institution of primary money laundering 

concern under Section 311 of thc USA PATRIOT Act. The investigation revealed that the 

network in question moved illegal drugs from South America to Europe and the Middle East via 

West Africa and that it lanndered hundreds of millions of dollars monthly through accounts held 

at LCB. The network also laundered funds through trade-based operations involving consumer 

goods throughout the world, including used car dealerships in the United States. The Treasury 

Department's finding concluded that it had rcason to believe that Hizballah derived financial 

support from the criminal activities of the network and that LCB managers were complicit in the 

network's money laundering activities. 

The links between transnational organized crime and terrorist financing are not new. From 

approximately 1990 through January 2005, Mohammad Essa was a member of an international 

heroin trafficking organization that was responsible for manufacturing and trdnsporting hundreds 

of kilograms of heroin in Afghanistan and Pakistan. The organization was closely aligned with 

the Taliban in Afghanistan, and provided financial support to the Taliban and related Islamic9 
34 

extremist organizations there. In return, the Taliban provided the organization with protection 

for its opium crops, heroin laboratories and drug-transportation routes. Essa managed the 

organization's heroin distribution operation in the Unitcd States, thc proceeds ofwhieh directly 

supported the insurgency in Afghanistan and a "jihad" against the United States. Essa was 

charged in May 2007 principally for conspiring to import into the United States $25 million 

worth of heroin from Afghanistan and Pakistan. In May 2009, a federal judge in the Southern 

District of New York sentenced Essa to 103 months incarceration. 

In another example, Dawood Ibrahim has reigned as one of the pre-eminent criminals in the 

Indian underworld for most ofthc past two decadcs. Ibrahim's syndicate is involvcd in largcscale shipments of narcotics in the United Kingdom and Western Europc. His criminal 

enterprise cngages in a wide range of criminal activities, sharing his smuggling routes from 

South Asia, the Middle East and Asia with al-Qa'ida and funding attacks by Islamic extremists 

aimed at destabilizing the Indian government. He is currently wanted by India for the 1993 

Bombay Exchange bombings, which killed hundreds oflndians and injured over a thousand 

more. Further, he is known to have financed the activities of Lashkar-c-Tayyiba (Army of the 

Righteous), a group designated by the Department of State as a Foreign Terrorist Organization 

and as a Specially Designated Global Terrorist entity in 2001. In October 2003, the Treasury 

Department designated Ibrahim as a Specially Designated Global Terrorist pursuant to Executive 

Ordcr 13,224 - cffectively forbidding United States financial entities from working with him 

and blocking any assets hc may have under U.S. jurisdiction. Hc is also listed under U.N. 

sanctions requiring all U.N. member statcs to takc similar actions. 

Others involved in international organized crime have also been arrested for supporting terrorist 

activities: Monzer Mohammad Al Kassar, a notorious narcotics and arms trafficker, was arrested 

in Spain at the request of the United States for conspiring to sell millions of dollars worth of 

weapons to the FARC that were to be used to kill Americans in Colombia. In February 2009, 

after his extradition to the United States, Kassar was scntcnccd to 30 years incarceration. In 

August 2009, international arms trafficker Jamal Yousefwas charged with selling military-grade 

weapons, also to thc F ARC, in exchange for nearly one metric ton of cocainc. He was arraigned 

in New York in August 2009. 

Terrorist organizations depend on money to recruit, plan, and carry out terrorist attacks and to 

avoid detection and capture. Like transnational criminal organizations, and sometimes through 

these organizations, they generate much of this funding from criminal activity. Our anti-money 

laundering and forfeiture laws arc among the most significant tools that the Department has to 

combat these organizations where they are most vulnerable and to choke off the flow of money 

to terrorism and transnational criminal activity. The Departmcnt has proposed enhancements to 

our existing statutory authority to further our efforts in this fight. 

10 
35 

Question from Senator Richard J. Durbin 

Question 6: 

I have long been concerned about organized retail crime ("ORC"), a serious problem that 

has links to international organized crime. ORC involves the coordinated theft of large 

amounts of items from retail stores by professional shoplifters called "boosters." Boosters 

then deliver the items to "fences," or middlemen who deliver the goods to warehouses 

operated by organized retail crime rings. At these warehouse locations, teams of workers 

re-Iabel, re-package, or modify items, often storing them in substandard conditions. 

Organized retail crime rings then resell their stolen merchandise at flea markets, swap',,' 

meets, and Internet marketplace sites. As ICE has previously indicated, "ORC rings are 

very sophisticated, compartmentalized and operate similar to criminal organizations 

involved in drug trafficking or human smuggling. Furthermore, transnational criminal 

syndicates such as Eastern European street gangs and organized crime elements have 

become increasingly involved, and utilize traditional money laundering techniques to 

conceal their profits." 

Retailers and the FBI estimate that organized retail crime costs retailers tens of billions of 

dollars per year and deprives states of hundreds of millions of dollars in lost sales tax 

revenues. The proceeds of organized retail crime can be used to finance other forms of 

crime, including gang activity, drng trafficking and terrorism. 

Please discuss the steps the Justice Department is takiug to combat organized retail crime. 

Response: 

The Department currently plays a central role in coordinating infoffilation-sharing and 

cooperation with the private sector on organized retail theft. The FBI, through its Organized 

Retail Theft program, specifically focuses on the most significant retail theft cases involving the 

interstate transportation of stolen property, and work closely with major retailers across the 

country to promote the sharing of intelligence. 

The Department of Justice, through the United States Attorney's OfIices, vigorously pursues 

appropriate cases of organized retail theft. For example, in October 2010, the United States 

Attorney's Office for the Northern District of California announced the guilty pleas of 15 

defendants in two criminal organizations for their roles in a large-scale fcncing operation to buy 

and sell over-the-counter health and beauty products and to launder the proceeds througI1 

complex financial transactions. One of those defendants ultimately agreed to the entry of a 

money jndgment in the amount of more than $14 million (which represents the gross proceeds 

the organization received from distrihutors who purchased stolen property during the period 

covered by the indictment). He also agreed to forfeit the following: real property; five vehicles; 

approximately $165,000 in cash; nine diamonds, twelve gold bars and other assorted watches 

and jewelry seized on the day the defendants were arrestcd; and the funds in ten bank accounts, 

totaling $81,502.93. Other defendants in the second case agreed to forfeit a money judgment of 

11 
36 

more than $5 million; two pieces of real property; one vehicle; approximately $24,000 in cash; 

and thc funds in five bank accounts, totaliug $84,077 .81. 

More recently, as of January 2011, five individuals are being prosecuted by the United States 

Attorney's Office in the Middle District of North Caroliua for their alleged roles in a conspiracy 

to steal baby formula from retail stores in several southern states, including North Carolina, 

South Carolina, Kentucky, Georgia and Virginia. The stolen products were collected in rented 

storage units in the High PointlThomasville, North Carolina area and then transported in bulk to 

a grocery store in Union City, New Jersey. All defendants have pleaded guilty and four of the 

five have been sentenced to terms of imprisonment ranging from 15 months to 3 t months. 

Overall, from 2007 to the present, at least 84 defendants engaged in organized retail theft have 

been charged by 15 U.S. Attorney's Offices in 20 indictments with a variety of charges ranging 

from interstate transportation of stolen property to wire and mail fraud and money laundering, as 

well as conspiracies to commit these crimes. 

12 
37 

Subcommittee on Crime and Terrorism 

Hearing on "Combating International Organized Crime: Evaluating Current Authorities, 

Tools, and Resources" 

Questions of Senator Richard J. Durbin 

Question for Assistant Secretary for Terrorist Financing Daniel Glaser 

I. I have long been concerned about organized retail crime ("ORC"), a serious problem that has 

links to international organized crime. ORC involves the coordinated theft oflarge amounts 

of items from retail stores by professional shoplifters called "boosters." Boosters then 

deliver the items to "fences", or middlemen who deliver the goods to warehouses operated by 

organized retail thell rings. At these warehouse locations, teams of workers re-Iabel, repackage, or modify items, often storing them in substandard conditions. Organized retail 

theft rings then resell their stolen merchandise at flea markets, swap-meets, and Internet 

marketplace sites. As ICE has previously indicated, "ORC rings are very sophisticated, 

compartmentalized and operate similar to criminal organizations involved in drug trafficking 

or human smuggling. Furthermore, transnational criminal syndicates such as Eastern 

European strcet gangs and organized crime clements have become increasingly involved, and 

utilize traditional money laundering techniques to conceal their profits." 

Retailers and the FBI estimate that organized retail crime costs retailers tens of billions of 

dollars per year and deprives states of hundreds of millions of dollars in lost sales tax 

revenues. The proceeds of organized retail theft can be nsed to finance other forms of crime, 

including gang activity, dmg trafficking and terrorism. 

Please discuss the steps the Treasury Department is taking to combat organized retail 

crime. 

The Treasury Department is committed to deterring and detecting allforms offinancial crimes, 

including organized retail crimes (ORC). The Bank Secrecy Act (BSA) and implementing 

regulations cast a wide net in this regard and impose information collection and reporting 

requirements onfinancial and non-jinanciai institutions and on individuals, generating 

information usefi,t/ to law enforcement. slIch as u.s. immigration and Customs E1'!jorcement, 

Homeland Security Investigations Special Agents, investigating ORC and other criminal activity. 

The BSA database currently holds approximately 180 million records offinancial transactions 

and other reports. Criminals encounter the information collection and reporting requirements of 

the BSA when they attempt to spend, deposit, invest, or move illicit proceeds: 

• The BSA requires anyone engaged in a trade or business who accepts cash in an amount 

over $/0,000 in one transaction or a series of related transactions to file with the 

internal Revenue Service a Report of Cash Payments Over $10,000 Received in a Trade 

or Business. The report requires a description o{the transaction, full identifying 

information of the parties involved, and , ... hether the merchant believes the transaction to 

be suspicious. 

• Depositmy institutions, securities broker-dealers, mutua/funds, andfutures commission 

merchants and introducing brokers have a similar filing obligation related to cash 

transactions, including cash deposits and withdrawals over $](),OOO. Thesefinancial 
38 

institutions also are required to veritY customer identification when they open an 

account, maintain transaction record~, and report suspicious activity, as appropriate, to 

the Financial Crimes Enforcement Network (FinCEN). To the extent that the business 

practices of customers might lead afinancial institution to suspect participation in illicit 

activity, such as participation in retail theft networks, law enforcement would have 

access to Suspicious Activity Reports filed with FinCEN. 

• Money services businesses (MSBs) are required to verify customer identification, 

maintain transaction records, and. .file suspiciolls activity reports when they sell to one 

customer more than $3,000 in travelers checks or money orders, or initiate a wire 

tran,~{er, above $3.000. MSBs responsible for prepaid access programs have the same 

obligations depending on certain criteria. Providers of open loop prepaid access, for 

example, that allow customer.I' to move more than $1,000 a day, access jimd~ 

internationally, reloCid at a non-depositmy source, or transfer value among the users, 

have full customer identification, record keeping, and reporting obligations. 

• Individuals entering or leaving the United States with more than $10,000 in currency or 

monetCilY instruments, or who send the money through the mail, are required tofile a 

Report of international Transportation of Currency or Monetary instruments with the 

Bureau o{Customs and Border Protection. 
39 

I 

1----'c:T:::-o

-

p

:-i

;:;- -Si:ARC~------'-

Hearing: Combating International Organized Crime: Evaluatlng Current Authoritics~ Tools, and 

Resources 

Primary: The Honorable Richard J, Durbin 

Committee: JUDICIARY (SENATE) 

Question: ICE recently launched the SEARCH (Seizing Earnings and Assets from Retail 

Crime Heists) Initiative to address the threat of transnational crime being committed by 

organized retail crime rings, Please discuss the actions that the SEARCH Initiative has 

undertaken and the results it has thus far achieved. 

Please discuss any other steps that ICE is taking to combat organized retail crime. 

Response: Homeland Security Investigations (HSl) is aware of the importance oflhe 

Seizing Earnings and Assets from Retail Crime Heists (SEARCH) Initiative and the 

impaet organized retail crime has on more than just our retail industry and retail 

eeonomy. HSI investigations have demonstrated that profits generated from organized 

retail crime represent a clear threat to the U.S. financial sector because profits may bc 

laundered through U.S. and international financial systems. Similar to other criminal 

organizations, organized retail crime rings look for and cxploit the vulnerabilities within 

these financial infrastmcturcs to move and store their illicit proceeds. 

HSI launched the SEARCH Initiative on February 8, 2011, due to the success of the 

Organized Retail Crime (ORC) Pilot program. This is an ongoing, national initiative that 

links federal, state, and local law enforcement, prosecutors, and the financial and retail 

community to provide a multi-faceted approach to prosecuting and deterring individuals 

and/or organizations involved in ORC. The retail industry has been pushing to make this 

a national initiative because this type of organized criminal activity is considered to be a 

local problem. Lack of visibility outside a jurisdiction can contribute to the appearance 

that it is a local problem. Federal investigations conducted by HSI, however, have 

proven that the level and sophistication of eriminal enterprises involved in ORC are often 

much grcater. HSI SEARCH cases have led to the seiznre of over $8.2 million in cash, 

property, and monetary instruments. 

Statistics--f'ebruary 8, 201 t (Inception) through November 9, 2011: 

Cases Initiated-I 29 

Criminal Arrests-84 

Indictments-56 

Convictions-23 

Seizures-351 

Search Warrants--4 

Administrative Arrests--15 
40 

.• Question#: I 

-_._-_._--_._---- Topic: SEARCH 

Hearing: Combating International Organized Crime: Evaluating Cuo"cnt Authorities, Tools, and 

Resources 

Primary: The Honorable Richard J. Durbin 

~.----. 

Committee: JUDICIARY (SENATE) 

Investigative Hours--78,983 

Note that several of the above investigations are ongoing and further indictments and 

convictions can be expected. 

A recent example of an HSI-led ORC ease involved a vast network of undocumented 

Honduran and El Salvadoran nationals involved in the "boosting" or theft of over-thecounter merchandise from pharmacies throughout the United States. Employees of the 

organization would clean and repackage the stolen products and then sell the merchandise 

to wholesale distributors. This investigation resulted in a 29-count federal indictment, 

charging seven defendants with conspiracy to transport stolen merchandise in interstate 

commerce, structuring monetary transactions, and money laundering. Three search 

warrants and eight arrest warrants were executed with 20 criminal/civil seizure warrants 

on bank accounts in the Houston, Texas, area. An analysis of financial transactions 

revealed the primary suspect generated, in a I· year period, more than $5 million from 

selling the stolen merchandise. 
41 

SUBMISSIONS FOR THE RECORD 

ihtparlment nf Jlt~tite 

STATEMENT 

OF 

LANNY A. BREUER 

ASSISTANT ATTORNEY GENERAL 

CRIMINAL DIVISION 

BEFORE THE 

SUBCOMMITTEE ON CRIME AND TERRORISM 

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

AT A HEARING ENTITLED 

"COMBATING INTERNATIONAL ORGANIZED CRIME: EVALUATING CURRENT 

AUTHORITIES, TOOLS, AND RESOURCES" 

PRESENTED 

NOVEMBER 1, 2011 
42 

Stateme(.l of Lanny A. Breuer 

Assistant Attorney General 

Criminal Division 

U.S. Department of Justice 

Subcommittee on Crime and Terrorism 

Committee on the Judiciary 

United States Senate 

"Combating International Organized Crime: Evaluating Current 

Authorities, Tools, and Resources" 

November 1,2011 

1. INTRODUCTION 

Mr. Chairman, Senator Kyl, and distingnished Members of the Committee: Thank you 

for inviting me to speak with you this morning about the threat posed by transnational organized 

crime, the efforts of the Department of Jnstice to address the threat, and steps Congress ean take 

that wit! assist in these efforts. I am honored to appear before you on behalf of the Department 

of Justice, along with my colleagues from the Departments of Treasury and Homeland Security. 

The fight against transnational organized crime is one of the highest enforcement 

priorities of the Department of Justice and the Administration. Together with the United States 

Attorneys' Offices and our many law enforcement partners, the Criminal Division, whose fine 

lawyers and staff I am privileged to lead, investigates and prosecntcs cases involving 

transnational organized crimc all over the country, indeed, all over the world. 

Transnational organized crime refers to self-perpetuating associations of individuals who 

operate transnationally for the purpose of obtaining power, influence, or commercial gains, 

wholly or in part by illegal means. These organizations promote and protect their activities 

through a pattern of violence and corruption, including by insinuating themselves into the 

political process and becoming alternate providers of governance, security, and livelihoods to 

win popular support. In the process, transnational organized criminals arc often assisted by 

willing facilitators, including lawyers, bankers, and business owners, who exploit their 

professional legitimacy to perpetuate and disguise illegal activity and profits. 

The convergence of threats posed by these groups is significant and growing. Last year, 

the National Intelligence Council issued an unclassified report identifYing five key threats that 

transnational organized crime poses to United States national security: 

I. Penetration of State Institutions. Transnational organized crime's penetration of 

governments is subverting the rule of law, democratic institutions, and transparent 

business practices. The growing reach of transnational organized criminalnctworks is 
43 

pushing them to seek strategic alliances with statc lcaders and foreign intdligence 

services, threatening stability and undcnnining free markets. 

2. Threat to the U.S. and World Economy. Transnational organized crime is increasing its 

subversion oflcgitimate financial and commercial markets, threatening U.S. economic 

intcrests and raising the risk of significant damage to the world financial system. 

3. Growing Cybercrime Threat. Transnational organized criminal networks are becoming 

increasingly involved in cybercrime, which costs consumers billions of dollars annually, 

creates risks to sensitive corporate and government computer networks, and undennines 

worldwide confidence in the international financial system. 

4. Threatening Crime-Terror Nexus. Terrorists and insurgents are incrcasingly tnrning to 

crime to generate funding and acquire logistical support. 

5. Expansion ofDrng Trafficking. Despite demonstrable counterdrng successes in recent 

years, illicit drngs remain a serious threat to the health, safety, security, and financial 

well-being of U.S. citizens. 

Responding to this assessment, in July the Administration released its Strategy to 

Combat Transnational Organized Crime ("TOC Strategy"), which set forth a whole-ofgovernment response to the enumerated threats. At the announcement of the TOC Strategy, 

Attorney General Eric Holder noted: 

Today's criminal organizations arc increasingly sophisticated. 

They know no borders. They threaten the stability of our financial 

system and the promise of a competitive marketplace. And their 

operations are putting far too m;m, .\merican bu"iHcsses, 

government institutions, consumers, and citizens at risk. 

The TOC Strategy outlines several strategic objectives at thc heart ofthe 

Department's efforts to address this threat: 

• the protection of Americans from the hann, violence, and exploitation of 

transnational criminal networks; 

• breaking the economic power of transnational criminal networks and protecting 

strategic markets and the U.S. financial system from penetration and abuse by 

transnational criminal organizations; and 

• defeating transnational crirninal networks that pose the greatest threat to national 

security by targeting their infrastmctures, depriving them of their enabling means, 

and preventing the criminal facilitation of terrorist activities. 

The strategy also recognizes that some intellectual property rights (IPR) and cyber crimes 

merit particular attention, as wcll as the nced to strengthen and safeguard our financial system: 

2 
44 

[Sjome TOC activity is inherently h:.;der to detect and deter. The 

United States will place special emphasis on IPR violations and 

cybcrcrimes duc to their particular impact on the cconomy and 

consumer health and safety. The United States remains intent on 

improving the transparency ofthe international financial system, 

including an effort to expose vulnerabilities that could be exploited 

by terrorist and other illicit financial networks. At the same time, 

the United States will enhance and apply our financial tools and 

sanctions more effectivcly to closc those vulnerabilities, [and] 

disrupt and dismantle illicit financial networks. 

The Department of Justice is committed to the fight against transnational organized crime 

and we have enjoyed certain successes to date. However, serious challenges rcmain, and 

additional tools are needed. As part ofthe TOC Strategy, the Administration has proposed a 

number of important legislativc improvements, which the Department believes could assist us 

and our law enforcement partners in meeting thesc challengcs and addrcssing the identified 

threats. 

n. CURRENT SUCCESSES IN COMBATING TRANSNATIONAL ORGANIZED 

CRIME 

The Department has made great strides in attacking transnational organized crime groups, 

particularly those with some physical presence or foothold in the United States. We have 

prosecuted groups involved in narcotics and narco-terrorism, kidnapping and extortion, and 

health care and other identity fraud crimes alike. Below are several key examples: 

Joint Colombian-United States Drug Trafficking Investigation: On September 2,20 II, 

the U.S. Au()rney's Office for the Southern District of Florida announced that 34 

individuals were charged 111 tive separate indictments in an operation that targeted a Drug 

Trafficking Organization (DTO) based in Bogota, Colombia that utilized U.S. registered 

aircraft to transport thousands of kilograms of cocaine from South America, to 

clandestine airstrips in Central America and the Caribbean region. The drug trafficking 

organization is aUeged to have purchased U.S. registered aircraft using nominees, who in 

turn submitted false documentation to the Federal Aviation Administration (FAA) to hide 

the identities of the South American drug traffickers who were purchasing the planes. 

The Colombian-based DTO, which arranged for the aircraft to depart from South 

America, allegedly had tics to drug trafficking organizations in Mexico. During the 

course ofthe investigation, law enforcement seized 1300 kilograms of cocaine, $1.6 

million in U.S. currency, and eight U.S. registered aircraft. The case is being prosecuted 

by a special unit within the Southern District of Florida that was establishcd in February 

2011, to prosecute the violent Bandas Crimina\es (BACRIM) drug trafficking groups in 

Colombia. 

Armenian Health Care Fraud: In October 2010, the Department announced charges 

against 73 memhers and associates of an Armenian-American organized crime gronp, 

with tics abroad, in five states (California, Georgia, New Mexico, New York and Ohio) 

for various health care fraud-related crimes involving more than $163 million in 

fraudulent billing. The defendants were charged with engaging in numerous frauds, 

3 
45 

including soplllSticated schemcs to dcfraud Medicare and insurance companies by 

submitting fraudulent bills for medically UlUlecessary treatments or treattnents that were 

never performed. As part of this prosecution, the defendant Armen Kazarian became the 

first "V or" or "Thief-in-Law," convicted of racketeering in the United States. I 

• International Computer I'Iacking: In November 2009, charges were filed based on a 

successful FBl investigation into a sophisticated international compntcr hacking ring 

involving defendants from Estonia, Russia, and Moldova. Various defendants were 

charged in the Northern District of Georgia with hacking into a computer network 

operated by a credit card processing company and using sophisticated techniques to 

compromise the data encryption used to protect customer data on payroll debit cards. 

Ultimately, counterfeit devices were employed to withdraw over $9 million from more 

than 2, I 00 A TMs in at least 280 cities worldwide, including cities in the United States, 

Russia, Ukraine, Estonia, Italy, Hong Kong, Japan, and Canada. Remarkably, this loss 

occurred within a span ofless than 12 hours. Through this investigation, the FBI 

uncovered a previously undetected hacking technique that compromised the bank's 

encryption system. This information was disseminated throughout the banking sector to 

prevent further losses. Five Estonian defendants have been arrested and charged in 

Estonia. One of those defendants was extradited to the United States. Additionally, one 

defendant in the United States and two defendants residing in Hong Kong were arrested 

for their involvement in this criminal enterprise. 

• Armenian Power Takedown: In February 2011, federal prosecutors from the United 

States Attorney's Office for the Central District of California, the Southern District of 

Florida and the Criminal Division announced charges against more than 100 members 

and associates of Eurasian organized crime groups, in six indictments, in four cities. The 

arrests included more than 80 defendants from the "'\rmenian Power group, who were 

charged with a wide variety of violent and frauo-related crimes. The alleged crimes 

included kidnapping, extortion, assault, witness intimidation, bank fraud, credit card 

fraud and drug distribution. AP's membership consists primarily of individuals whose 

heritage goes back to Armenia and other Eastern Bloc countries. AP is an international 

organized crime group that started as a street gang in East Hollywood, California in the 

1 980s. 

• Operation Whirling Dervish: In July 2011, the Department announced charges resulting 

from a DEA nareo-terrorism undercover operation, charging three defendants with 

conspiring to provide various forms of support to Hizballah, the PKK, and Pejak. Two 

defendants were arrested in Bucharest, Romania, where they were detained pending 

extradition to the United States; the third was arrested in the Republic oflhe Maldives. 

This investigation was supported by Romanian authorities who identified Kurdish PKK 

members that were selling heroin to support their terrorist organization. It also identified 

A "vor" (translated as "Thief-in-Law" refers to a member ofa select group of high-level 

criminals from Russia and counties that had been part of the former Soviet Union, induding 

Arn1enia. "Vors" offer prestige and protection to criminal organizations in return for a share of 

the criminal earnings, and use their position of authority to resolve disputes among criminals" 

4 
46 

Iranian Pejak elements that were utilizing the drug trade to finance operations and 

Hizballah elements that were attempting to purchase military-grade weaponry. This 

investigation is continuing. 

• Eastern European Money Laundering: In June 20 II, a joint prosecution between the 

Division's Computer Crime and Intellectual Property Section of the Criminal Division 

and the U.S. Attorney's Offices in Chicago and Washington, D.C., resulted in a 

Romanian man being sentenced to 48 months imprisonment in the United States for his 

role in an international money-laundering scheme involving the creation of fraudulent 

online auctions. In a similar case handled by the Criminal Division's Organized Crime 

and Gang Section, a Bulgarian man was sentenced this September to 64 months 

imprisonment for his role in an auction scheme, which appears to have been orchestrated 

by a transnational criminal group based in Eastern Europe. Another individual, a 

Romanian citizen, was sentenced to 24 months imprisonment for his role in the same 

conspiracy, also in September 2011. According to court documents, in less than one 

year, the scheme netted more than $1.4 million trom U.S. victims. 

As is clear from the examples cited above, a key component of our transnational 

organized crime strategy has been forging successful and strategic partnerships with foreign law 

enforcement authorities. The example of Romania is instructive. It is estimated that 

approximately one-third of so-called "phishing" attacks targeting United States citizens originate 

in Romania, and we have worked closely with authorities there to identify and prosecute those 

involved.2 As an important first step, several law enforcement agencies, including the Federal 

Bureau ofInvestigation, the United States Secret Service and the Drug Enforcement 

Administration, have employees stationed in Romania, who work side by side with Romanian 

law enforcement in an effort to target cyber-criminals and other organized crime. The results 

have been significant. Ecrlicr this year, jc;,;t United States-Romanian investigations resulteC in 

the arrest of over 100 organi..:ed crime related cyber-criminals in our two countries. Those arrests 

involved various schemes involving the fake sales of merchandise, including cars and boats, over 

the Internet to thousands of victims in the United States and elsewhere. 

Just last month, I traveled to Romania and, in meeting with United States and Romanian 

law enforcement, I observed first-hand how closely our two nations are collaborating. Through 

joint cooperation efforts with our foreign counterparts and by deploying our resources in 

innovative ways, we have succeeded in disrupting and dismantling various criminal syndicates 

attacking United States citizens and propelty. 

Another important innovation critical to our efforts has been the development of the 

International Organized Crime Intelligence and Operations Center, or IOC-2, here in the 

Department of Justice. Building on our successful counter-narcotics work, IOC-2 brings 

together nine federal law enforcement agencies in a powerful center to share data and 

intelligence, both domestically and internationally, on organized crime investigations. IOC-2 

greatly expands our abilities to spot patterns and coordinate investigations against transnational 

"Phishing" refers to an email fraud method in which the perpetrator sends out legitimatelooking email in an attempt to gather personal and financial information from recipients. 

5 
47 

organized crime nctworks. IOt~-2 also aids our attempts to identifY forfeitable assets associated 

with international criminal activities and promote seizure and forfeiture judgments. 

IlI. CHALLENGES TO GREATER SUCCESS 

Our work on transnational organized crime enforcement is far from over. While the 

threat is clear, the obstacles to successfully investigating, prosecuting and dismantling these 

networks are numerous. Transnational organized crime groups and the offenses they commit 

present significant challenges. As a point of comparison, it has been well documented that 

domestic organizcd crime syndicates employ tactics that create many roadblocks for law 

enforcement: layers of secrecy, corruption of officials, and fear and intimidation that silence 

witnesses. Despite these challenges, over the years, Congress and the Department of Justice 

have developed methods of attacking domestic organized crime to the point where our record of 

achievements is one of the federal government's great success stories. Transnational organized 

crime poses an additional dimension of challenges: while the effects are felt hcre in the United 

States, the perpetrators, witnesses and evidence reside abroad, often in jurisdictions unable or 

unwilling to cooperate with our investigative efforts. 

Take a few simple examples. Organized cyber criminals direct cyber attacks from abroad 

that target United States citizens and steal their identities for the purpose of raiding bank 

accounts or placing fraudulent credit card purchases. Other organized criminals commit crimes 

abroad and launder and maintain funds in the United States, without ever traveling to our shores, 

and sometimes through the usc of U.S. shell corporations. 

In each instance, the investigation and prosecutions of these organizations and crimes 

pose significant challenges. At a minimum, pursuing an investigation abroad is often time 

consuming ann delays can be significant and undermine an inv<:'<;tigation. Tracking down 

criminals abroad often requires the cooperation of foreign law enforcement agencies and even if 

we locate our targets, many of the investigative tools for gathering evidence are not available to 

us in an international context. In some countries, we cannot employ Title III wiretaps against the 

perpetrators, nor can we, in many cases, send an undercover agent to gather incriminating 

statemcnts. The country's law enforcement agencies may not have the level of training or the 

necessary technology to implement the investigative steps, even if they are authOlized. 

Arresting lower level members of the organization and persuading them to cooperate 

against higher level bosses is also extremely di fficult and may require the approval and 

cooperation of foreign authorities, as well as navigating various domestic immigration and other 

laws. Other countries have domestic laws which ban the extradition of their own citizens to 

foreign countries for prosecution. In such instances, the only option may be for the foreign 

government to prosecute the target under their domestic laws, and often the associated penalties 

are little more than a "slap on the wrist," particularly in cybercrimc cases. Still other targeted 

organized crime groups may have so penetrated the country's law enforcement entities or 

political leadership that the country will refuse to answer our request for assistance. 

These concems are not hypothetical. The prosecution, or the attempted prosecution, of 

Semi on Mogilcvich makes this clear. Mogilcvich is a powerful Russian organized crime figure 

6 
48 

and the head of an international criminal enterprise engaged in activIties designed to penetrate 

and eorrupt strategic sectors world-wide. He and his co-conspirators were indicted by the U.S. 

Attorney's Office for the Eastern District of Pennsylvania in 2003 on racketeering, securities 

fraud and money laundering charges, yet remain at liberty. At the heart of the charged crimes 

was a sophisticated multi-million dollar scheme responsible for defrauding thousands of 

investors in the United States, Canada and abroad in the stock of a pub lie company that was 

headquartered in the United States. The indictment alleges that, while residing in Eastern 

Europe, Mogilevich filllded and controlled a criminal enterprise, comprised of individuals and 

companies in over twenty countries throughout the world, including corrupt accountants and 

auditors, and nnmerous United States shell companies which wcre used to conceal their 

involvement and to launder proceeds from the scheme. Despite committing crimes here, 

Mogilevich remains outside onr reach and is belicvcd to currently be residing in Moscow, 

Russia. He is currently on the FBI's Ten Most Wanted Fugitives List. 

Those transnational criminal nctworks involved in cyber crimes pose even further 

barriers to prosecution. The technology revolution has facilitated cyber crime, enabling those 

involved to access and exploit the personal information of others. Today's criminals can 

remotely access the computer systems of government agencies, universities, merchants, financial 

institntions, ercdit card companies, and data processors from t110usands of miles and many 

international borders away to steal large volumes of personal information including personal 

financial information. 

Finally, the ability of transnational criminal organizations to generate vast snrns of money 

is both their strength and their weakness. Criminal organizations are businesses, and like any 

business profit is their primary motivation. The wealth generated by today's drug cartels and 

other international criminal networks enables some of the worst criminal clements to operate 

with impunity while wreaking haY')c on individnals and institntions around the world. 

Generating proceeds often is only the first step -criminals then launder their proceeds, otten 

using our financial system to move or hide their assets and often with the help of third pmties 

located in the United States. Indeed, international criminal organizations increasingly rely on 

these third parties and on the usc of domestic shell corporations to mask crimes and launder 

proceeds under the guise of a seemingly legitimate corporate structnre. We can usc our asset 

forfeitnre laws to take the assets away from the criminal organizations and dismantle their 

financial infrastructures but, as discnssed below, the existing law nceds to be modernized. 

IV. LEGISLA nON 

There arc important steps we can take to better address cxtraterritorial threats and the 

increasingly global reach oftransnational criminal organizations. The Department of Justice 

together with our partners have developed a package of legislative proposals to ensure that 

federal law keeps np with the rapid evolution of organized criminal activity. We need changes to 

our existing money lanndering, asset forfeitnre, narcotics and racketeering laws. Additional 

proposals recognize that in an increasingly global law enforcement environment, witness security 

and protection for foreign witnesses mnst also be available. And finally, stifTer penalties for 

certain crimes, such as intellectnal property offenses, which arc increasingly the focus of 

transnational organized crime, arc also necessary. These proposals arc outlined below. 

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49 

A. Anti-Money Laundering and Forfeiture Laws 

The TOC Strategy recognizes that criminals who commit their crimes overseas often 

launder and maintain their assets in the Unitcd States. Accordingly, a focal point of the Strategy 

is the Proceeds of Crime Act (POCA) a comprehensive money laundering and forfeiture 

proposal designed to address gaps in our current legal authority. Money laundering and 

forfeiture laws strike at the very core of transnational criminal organizations by preventing them 

from using our financial system to move and hide their money, and by depriving them of the 

profit and capital needed to operate their enterprises. 

POCA would updatc and clarifY the current list of specified unlawful activities that arc 

predicates for money laundering to include all domestic felonies except those specifically 

exempted, state felonies and federal misdemeanors that are included in the existing racketeering 

predicates, and any foreign crimes that would be felonies in the United States. The changes 

sought would also increase the scope and effect of anti-money laundering provisions in laws 

conceming promotional money laundering, bulk cash smuggling, tax evasion, and money 

laundering through informal value transfer systems, and would clarifY the application of the law 

to commingled funds and aggregated transactions. Finally, the proposal also extends wiretap 

authority for money laundering offenses, and it extends the extraterritorial provision for money 

laundering to non-United States citizens where their extraterritorial acts in violation of 18 U.s.C. 

§ 1956 cause an effect in the United States. These ehanges would fill in numerous gaps and 

omissions in our decades-old anti-money laundering laws and improve the ability to prosecute 

moncy launderers and to forfeit criminal proceeds and facilitating property. 

POCA also seeks to update our civil forfeiture capabilities. Civil forfeiture is a 

particularly effective tool in this regard, as it enables prosecutors to forfeit the proceeds of crime 

even when criminal prosecutions of those involved are not possible. Thus fugitives, drug 

kingpins, and corrupt foreign officials not present in the United States cannot elude the reach of 

our enforcement entircly. 

POCA would enhance the govcmment's civil forfeiturc authority in a number of 

important ways. It seeks to expand the scope of civil forfeiture authority to include "facilitating 

property," or property that cnables crime to occur, for all money laundering predicates and 

broadens the categories of facilitating property that can be civilly forfeited in connection to drug 

offenses and alien smuggling and harboring. To bettcr attack the financial infrastructures of 

these organizations through more effective financial investigations, the proposal provides 

increased civil forfeiture, administrative, and foreign bank record subpoena authority. It also 

would enable the use of classified information in civil forfeiture cases, which is critical in going 

after transnational criminal organizations that threaten our national security. 

Taken together, the changes will make our investigations and prosccutions against the 

financial operations oftransnational organized crime groups much more effective. By taking 

their money, we take away these groups' reason to exist and ability to operate. We are committed 

to working with Congress to combat the use of shell companies to generate and move illicit 

8 
50 

money by requiring that those who form entities in the United States disclose beneficial owner 

information. 

B. Racketeering Provisions 

Second, thc Administration proposes to modernize our most powerfill anti-organized 

crime statutes: the Racketeer Influenced and Corrupt Organizations Act, or RICO, and the 

Violent Crimes in Aid of Rackectering statute, or VICAR. The proposed amendments to the 

RICO statute, 18 U.S.c. § 1961, et seq., would clarify that RICO has extraterritorial application 

in cases where criminal enterprises operate at least in part in the United States, or where they 

commit any predicate acts in the United States, or where the charged pattern includes offenses 

that apply extraterritorially. Criminal organizations have expanded their activities to increase 

their power, influence, and wealth, availing themselves of new opportunities. The proposed 

legislation, therefore, expands the list of racketeering predicate crimes to include offenses that 

are prevalent in an increasingly interconnected world and engaged in by transnational organized 

crime groups, including economic espionage, computer fraud, aggravated identity theft, 

violations of the Foreign Corrupt Practices Act, health care fraud, illegal firearms trafficking, as 

well as a limited munber of violations of foreign law. 

These proposed changes are important to address a number of recurring issues in 

organized crime prosecutions. In a number of instances, thc government has been unable to 

charge the members or associates of a criminal enterprise with RICO because the underlying 

criminal activities were not listed as predicates. The new predicates are intended to fill these 

gaps. 

Amendments to the Violent Crimes in Aid of Racketeering (VICAR) statute, 18 U.S.c. § 

1959, are also recommended, including a pcovision which would provide for extraterritorial 

application in certain situations such as when (he underlying s~atute criminalizing the violent act 

in question applies extraterritorially or when any part of the violation occurs within the 

jurisdiction of the United States. 

C. Witness Protection 

The Administration is also proposing legislation that fosters international cooperation 

regarding the relocation of witnesses giving testimony in criminal cases, and relatives and other 

persons close to them. Relocation is sometimes the only way to protect the security of such 

persons, and enhancing our ability to cooperate with foreign governments in these situations will 

greatly improve our ability to mount multinational operations against high-priority transnational 

organized crime targets. 

D. Extraterritorial Jurisdiction 

The Administration proposes eriminalizing conduct occurring on vessels or aircraft 

owned by the United States or a United States citizen, vessels registered under U.S. or state law, 

and aircraft registered under United States law if such vessels or aircraft are outside the 

jurisdiction of any particular state. In the absence ofsnch expanded jurisdiction, the United 

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51 

States would, for example, lack federal jurisdiction over a sex-trafficking offense committed on 

board a United States-registered vessel or aircraft located between two foreign countries. Our 

proposal would addrcss an existing reservation on jurisdiction by the United States to the 2000 

UN Transnational Organized Crime Convention, and in particular the supplementing Trafficking 

in Persons ProtocoL 

E. Intellectual Property Crimes 

Intellectual property crime is a strong lure to transnational organized criminal enterprises, 

which have increasingly turned to counterfeiting and piracy as a relatively low risk high reward 

means to fund their other unlawful activities. The Administration is seeking to strengthen 

pcnalties involving particularly egregious intellectual property offenses. Specifically, as first 

recommended in the Administration's White Paper on Intellectual Property Enforcement 

Legislative Recommendations transmitted to Congress by the Intellectual Property Enforcement 

Coordinator, the Administration has proposed that Congress issue direct the United States 

Sentencing Commission to consider several sentencing enhancements for offcnscs committed in 

connection a variety of aggravated conduct, including when the IP crime is committed in 

furtherance of criminal activities oflocal, national, or intcrnational criminal enterprises or when 

it involves the conscious or reckless risk of death or serious bodily injury. Furthermore, it is 

imperative that defendants whose sale of infringing products for usc in critical infrastructure, 

national defense, security, and law enforcement face significant criminal penalties, and the 

Administration is recommending that Congress direct the Sentencing Commission to consider an 

enhancement in this circumstance. 

F. Narcotics 

The Administration proposes to expand conspiracy liability when controlled substances 

are destined to the United States from a foreign country. Under our proposal, m,miucrs of any 

conspiracy to distribute controlled substances will be subject to United States jurisdiction when 

at least one member of the conspiracy intends or knows that the drugs will be unlawfully 

imported into the United States. We are also recommending changes to sentencing policy for 

violations of the Narcotics Kingpin Designation Act. Such violations currently carry statutory 

penalties of up to 30 years' imprisonment and/or fines up to $5,000,000. Sentencing guidelines 

for these violations, however, do not yet exist. The Administration is recommending a 

congressional directive to the United States Sentencing Commission, proposed statutory 

language, and a proposed sentencing guideline to yield a sentencing range of 3 7 46 months for 

a first offender, absent adjustments or departures. 

V. CONCLUSION 

Transnational organized crime presents many new challenges for United States law 

enforcement. The investigations and prosecutions of transnational organized criminals groups 

arc among the most difficult and complex cases in the Department. Even as we develop our 

cases and push the envelope of what our agents and prosecutors have tried in the past, the 

criminals continue to evolve rapidly, deploying new techniques and strategies to evade our nets 

and continue their illegal activities. It is important to ensure that federal agents and prosecutors 

are fully anned with the most comprehensive and up to date legislative and investigative tools to 

carry this fight ac'\)ss the globe and attack the criminals where they live. Only in till'. way can 

we protect our citizens, corporations, and property from those who would take them from us. 
52 

Written Testimony of the U.S. Department of th0 Treasury's Assistant Secretary for 

Terrorist Financing Daniel L. Glaser befOl'e the Senate Committee on the Judiciary, 

Subcommittee on Crime and Terrorism 

Combating International Organized Crime: Evaluating Current 

Authorities, Tools, and Resources 

November 1, 2011, Time 10:00 am; Dirksen Senate Office Building Room 226 

Introduction 

Chairman Whitehouse, Ranking Member Kyl, and distinguished members of this Committee, 

thank you for the opportunity to appear before you today to discuss the Treasury Department's 

contribution to the Obama Administration's July 2011 integrated strategy to address the threat 

posed by transnational organized crime (TOC). 

In early 2010, the United States completed a comprehensive assessment of transnational 

organized crime - the first since 1995 which concluded that TOC networks have expanded in 

scope and sophistication, engage in a range of illicit activities, and are taking advantage of the 

increasingly integrated international financial system. Among the most startling conclusions of 

that assessment is that these gronps' growing infiltration of legitimate commerce and economic 

activity fundamentally threatens U.S. economic interests at home and abroad and could cause 

significant damage to the world financial system through subversion, exploitation, and distortion 

oflegitimate markets and economic activity. Terrorists and insurgents increasingly arc turning 

to crime and criminal networks for funding and logistics. Criminal networks are increasingly 

exploiting vulnerabilities in information technology and arc involved in cyber crime. The result 

is a convergence of complex, volatile, and destabilizing threats to U.S. national security. 

To combat this growing threat to U.S. and international security, the Obama AdministratioE 

announced this past July a national Stlilt~gy to Combat Transnational Organized Crime ~thc, 

"Strategy"). The Strategy lays out fivc strategic objectives, 56 priority actions, and new and 

innovative capabilities and tools to mitigate the threat. 

Prcsident Obama's opening message to the Strategy makes c1car that despite a long and 

successful history of dismantling criminal organizations, not all of our capabilities have kept 

pace with the expansion of21s' ccntury transnational criminal threats. Shortly before the White 

House announced the Stratcgy, President Obama signed Executive Ordcr (E.O.) 13581, thereby 

providing the Treasury Department a new tool and authority to target the financial underpinnings 

of the world's most powerful transnational criminal organizations. 

This Executive Ordcr supplements an array of the Treasury Department's tools and capabilities 

that can be used to target TCOs and safcguard our financial system fr0111 abuse. OUf targeting 

capabilitics include financial sanctions, the imposition of special regulatory measures and 

requirements, and engagcment with at-risk financial institutions and jurisdictions. 

In my testimony, I will focus on the Treasury Department's efforts to implemcnt E.O. 13581, as 

well as thc othcr authoritics we have available to use in implementing the Strategy, such as 

Section 311 of the USA PATRIOT Act. I will also discuss our ongoing work to promote 
53 

financial transparency domestically and abroad, and the importance of transparency in mitigating 

the threats posed hy TOC and other forms of illicit finance. In particular, I will address the abuse 

of legal entities as a systemic vulnerability to TOC networks and a chronic challenge to 

achieving financial transparency. Addressing this vulnerability requires a broad approach, 

including the adoption of legislation to facilitate the availability of meaningful beneficial 

ownership information for companies created within the United States. 

Targeted Financial Measures 

Historically, economic sanctions have been the Treasury Department's primary tool to target the 

financial networks of illicit actors, including drug trafficking organizations. As these 

organizations generate hundreds of millions of dollars per year that are often placed in or moved 

through the international financial system, we have used targeted financial measures to restrict 

their access to the U.S. financial system. One such authority specifically designed to target drug 

trafficking organizations is the Foreign Narcotics Kingpin Designation Act (the "Kingpin Act"). 

Since lune 2000, over 1000 individuals and entities have been designated under the Kingpin Act, 

resulting in the blocking of millions of dollars in financial assets in the United States. The 

Kingpin Act provided the flexibility necessary to continue targeting Latin American drug cartcls 

over an extended period of time as the drug trade under the control of Colombian cartels gave 

way to a more segmentcd market progressively dominatcd by Mexican TCOs and shifted 

geographically from Colombia to Mexico. Recognizing the success of measures such as the 

Kingpin Act, the Strategy proposes that a similar method, with the flexibility to adapt to varying 

situations, be used to target TOC. 

Executive Order 13581 

While the Strategy draws from a broad range of tools and anthorities to combat the threat posed 

by TCOs both domestically and abroad, targeted financial safl';lions will be employed to help 

protect the U.S. financial system from these groups. On July 24,2011, President Obama signed 

E.O. 13581, "Blocking Property of Transnational Criminal Organizations," imposing sanctions 

against significant TeOs that threaten the U.S. national security, foreign policy, or economy and 

granting the Treasury Department the authority to address TeOs under the International 

Emergency Economic Powers Act. For the first time, the President recognizes that TOC warrants 

the declaration of a national emergency and the imposition of economic sanctions. 

[n the annex of E.O. 13581, the President identified and imposed sanctions on four significant 

TeOs: the Brothers' Circlc (a.k.a. Moscow Center), the Camorra, the Yakuza, and Los Zetas. 

The four groups in the annex were chosen because they are large, sophisticated, multi-national 

organizations engaged in a wide variety of dangerous criminal enterprises ranging from narcotics 

trafficking, human trafficking, weapons trafficking, murder, complex financial fraud, and 

intellectual property theft that threaten the U.S. national security, foreign policy, and economy. 

Let me provide you additional background on these four organizations. 

• First, the Brothers' Circle is a multi-ethnic criminal group composed ofleaders and 

senior members of several Eurasian criminal groups largely based in countries of the 

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54 

fonner Soviet Union, but extending to the Middle East, l\.friea, and Latin America. The 

Brothers' Circle serves as a coordinating body for these criminal networks, including 

mediating disputes between the individual criminal networks and directing global 

criminal activity. 

• The Camorra, Italy's largest organized crime group, is a loose collection of allied and 

competing local clans in the province of Naples and the Campania region of Italy. The 

Camorra operates internationally and is involved in serious criminal activity such as 

counterfeiting and narcotics trafficking. The Camorra may earn more than 10 percent of 

its roughly $25 billion annual profit through the sale of counterfeit and pirated goods -

such as luxury clothing, power tools, CDs, DVDs, and software .. 

• The third group, the Yakuza, comprises the major Japanese organized crime syndicates, 

and had more than an estimated 80,000 members in 2008. The Yakuza derives a majority 

of its profits from the drug trade, but is also involved in weapons trafficking, and nearly 

all aspects of human trafficking and sexual exploitation. The Yakuza is also heavily 

involved in white-collar crime, often using front companies to hide illicit proceeds within 

legitimate industries, including construction, real estate, and finance. 

• Lastly, Los Zetas, fonnerly the arnled wing of the Gulf Cartel, is an extremely violent 

transnational group based primarily in Mexico. According to press reporting, the 

organization is estimated to have thousands of members collectively in Mexico, Central 

America, and the United States and is specifically responsible for the safe passage of 

large quantities of illegal narcotics, including cocaine, methamphetamine, heroin, and 

marijnana from or through Mexico and evcntually into the United States. In addition to 

drug trafficking, Los Zetas is involved in extortion, money laundering, intellectual 

property theft, and human <;muggling. President Obama previously identified Los Zetas 

as a significant foreign narcotics trafficker under the Kingpin Aet in 2009 (its fonner 

parent organization, the Gulf Cartel, was similarly identified in 2007). Since that time, 58 

individuals and entities have been designated as associates of the two groups. Its listing 

under E.O. 13581 demonstrates that Los Zetas has expanded its illicit activities beyond 

drug trafficking. 

The President's strategy draws from a broad range of tools and authorities to attack the threat 

posed by these organizations. As part of this broad strategy, sanctions will complement U.S. law 

enforcement authorities in the fight against transnational criminal organizations, as they have the 

in the case of Kingpin Act designations. The Treasury Department intends to build on our close 

cooperation with the U.S. Department of Justice and other United States Government agencies to 

identify key nodes of operation for coordinated action in disrupting TOC networks. 

In order to implement E.O. 13581 effectively, the Treasnry Department has scoped out a series 

of actions that Treasury will undertake simultaneously in furtherance of the President's Strategy. 

These actions include: pursuing derivative designations of the four groups, identitying additional 

transnational criminal organizations, liaising with key foreign partners, and conducting outreach 

to the private sector. 

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55 

The Treasury Department, in partn::;;ship with law enforcement and Intelligence Community 

counterparts, will attempt to map out the criminal networks of these groups in order to pursue 

derivative designations aggressively. As affiliates of the groups do not make transactions under 

the group name, it is essential to designate the groups' leadership, operatives, associated 

companies and businesses, and financial facilitators. Designating such individuals and entities 

owned or controlled by, or providing material support to, these organizations will increase the 

financial pressure on their networks and affect their ability to conduct financial transactions. 

In addition to pursuing derivative designations of groups currently listed in the annex of the E.O., 

the Treasury Department will work with our interagency partners to identify additional TCOs 

that pose a threat to the national secnrity, forcign policy, and economy of the U.S. for potential 

designation. 

We will work with like-minded foreign partners to build an international coalition to combat 

TOC more broadly. Many countries in Europe and Asia have recognized the TCO threat long 

ago and have taken domestic steps to mitigate the threat. We believe they are natural partners in 

this initiativc. We have already begun outreach to strategic allies to raise awareness of our 

authorities, to discnss potcntial information sharing opportunitics, and build support for an 

international effort against TOC. Under Secretary David Cohen was in Europe last weck, whcre 

he raised TOC as a priority issue with his counterparts there. I will travel to Moscow next week, 

where I will also raise this as an area where we hope to expand our cooperation with our Russian 

counterparts. 

We will make outreach to the U.S. and international financial community an essential componcnt 

of our efforts. Our goal will be to cnsure that banks undcrstand the risks of doing business with 

TCOs and are taking appropriate due diligence mcasures. Our partnership with the private scctor 

on other sanctions programs has amplified the effccts of our aetions .. Our aim, therefore. is to 

replicatc.the SUCCC3, of that partnership in order to make it more di fficuit for these illicit groups 

to abuse the U.S. and intcrnational financial system. 

While enacting targetcd financial measures against these four groups is our first priority, the 

Treasury Department is also investigating whethcr it would be appropriate to use other rcstrictive 

measures against TOe. 

Section 311 of the USA PATRIOT Act 

The Administration's Strategy calls for usc of Section 311 ofthc USA PATRIOT Act, in 

addition to the new Executive Order, to combat TOC. This powerful tool allows the Treasury 

Department to take action to protect the U.S. financial system from specific threats. It authorizes 

thc Treasury Dcpartment to identify a foreign jurisdiction, foreign financial institution, type of 

account or class of transactions as a primary moncy laundering concern, and impose anyone or 

combination of a range of special measures that U.S. financial institutions must take to protect 

against illicit financing risks associated with the subject of thc action. In practical terms, Section 

311, where appropriate, enables thc Treasury Department to cut off foreign financial institutions 

from the U.S. financial system on the grounds that they facilitate transnational organized crime 

or other illicit activity. 

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56 

For example, in February 20 II, the Treasury Department identified the Beirut-based Lebanese 

Canadian Bank (LCB) as a financial institution of primary money laundering concern for its role 

in facilitating the activities of an international narcotics trafficking and money laundering 

network operating across five continents. The LCB action was the product of close coordination 

and cooperation with the Drug Enforcement Administration. Similarly, in 2005, the Treasury 

Department idcntified two Latvian banks (VEF Bank and Multibanka) under Section 311 

because they were being used to facilitate or promote money laundering and other financial 

crimes. 

Several of our Section 311 actions against foreign banks have highlighted the role of shell 

companies in illicit activity. The Multibanka and VEF actions [ mention above noted that the 

banks were involved in transferring funds involving illicit activity by multiple shell companies 

with no legitimate business purposes. Further, the Section 311 findings against Macau's Banco 

Delta Asia (BOA) and Infobank in Belarus alerted financial institutions around the world to the 

role that front companies play in furtherance of a wide array of illicit conduct. In these actions, 

the Treasury Department exposed the fact that BOA was providing services to North Korean 

front companies, and Infobank was involved in laundering improper fees derived from the 

United Nations' Oil for Food Program via shell companies. Thcsc findings illustrate the need for 

enhanced financial transparency, which is also a component of the President's Strategy. 

Financial Transparency 

The success of our efforts to combat TOC networks through targeted action, including through 

thc application of E.O. 13581, rclies on our ongoing work to promote a transparent global 

financial system. The Prcsident's Strategy notes that such transparency is critical to law 

enforcement's efforts to combat TOe. Enhanced transparency also enables financial institutions, 

law enforcement and other relevant authorities to implement and enforce the targeted measures 

described above. More broadly, financiai transparency is the cornerstone of our efforts to protect 

the financial system from abuse. It is the foundation of virtually all of our efforts and successes 

to date in countering illicit finance, from an increasing reliance on targeted financial measures in 

addressing global security threats to supporting international efforts to strengthen global antimoney laundering/combatting the financing of terrorism (AMLlCFT) standards. 

The growth and increasing sophistication of the international financial system in recent years has 

enabled TCOs and other illicit actors to move money, hide assets, and conduct transactions 

anywhere in the world, exposing financial centers to exploitation and abuse in an unprecedented 

way. Our success in combating these illicit actors going forward will depend critically on our 

continued efforts to increase transparency across the international financial system. By requiting 

the collection of key information regarding the nature of transactions and the relevant transacting 

parties and beneficial owners, a transparent financial system will compel some criminals to avoid 

transactions altogether and pose significant obstacles for others who nevertheless seek to move 

funds in support of their illicit activities. And if, despite our best efforts, these individuals and 

entities still manage to access the financial system, the information collected by financial 

institntions enables law enforcement to trace the money and track down criminals and other bad 

actors. 

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57 

The stakes are high. Just as financial transparcncy has hclped us combat WMD proliferators, 

corrupt kleptocrats, and terrorist financicrs, it also serves as a powerful wcapon against 

transnational organized criminal networks. Where transnational criminals seek to exploit 

complexity and opacity, we must seek to untangle and bring clarity. As we enhance financial 

transparcncy, we diminish their ability to commit crime. 

How we achieve jinancial transparency 

In the broadest sense, our efforts to promote a transparent financial system encompass ongoing 

work to strengthen financial transparency across the fomlal financial sector and cxpand such 

transparency to the informal sectors, such as hawala and other informal remittance systems. This 

has not been limited to the U.S. financial system, but has included efforts to strengthen global 

standards and facilitate implementation of effectivc AMLlCFT regimes in countries around the 

world. Working through various multilateral bodies, we have promoted transparency throughout 

the intemational financial system and have integrated robust systemic AMLlCFT safeguards into 

the intemational financial architecture. This global AMUCFT architecture has enabled us to 

systematically identify and address illicit financing vulnerabilities in the international financial 

system on an ongoing basis. I would like to take a moment to discuss some of these successes in 

more detail. 

Developing a Global AMLlCFT Framework 

The global threat of transnational criminal organizations and the increasing interdependence of 

the international financial system require a global approach to combating transnational organized 

crime. The Treasury Department's Office of Terrorism and Financial Intelligence (TFI) has 

worked with its interagency and international partners to help create a global AMUCFT 

framework as a foundation, for taking action against criminal networks and for closing down 

vulnerabilities that they exploit. This framework consists of several intergovernmental 

organizations that collectively develop, assess and facilitate jurisdictional implementation of 

measures that are essential to combating various forms of illicit finanee, including transnational 

organized crime. Such organizations include: 

• FinancialAction Task Force (FATF) The FATF is the premier international policymaking and standard-setting body in the intemational effort against terrorist financing, 

money laundering, and other illicit finance. Established by the G-7 Economic Summit in 

1989, the FATF is an intergovernmental body that has grown to include 36 members, 

representing most major financial centers in all parts of the globe. The FA TF sets global 

AMUCFT standards, promotes and assesses compliance with those standards, and, when 

necessary, promotes compliance through diplomatic pressure and coordination of economie 

eountermeasures through its member govcmments. Through a combination of technical 

expertise and political and economic strength, the FA TF has been unique among 

international bodies in its ability to take strong, effective multilateral action to prompt 

positive change in strengtheningjurisaictional AMLlCFT regimes worldwide. My office, 

Terrorist Financing and Financial Crimes (TFFC), manages the FATF program for the U.S. 

government and heads the interagency U.S. delegation to the FATF. The U.S. delegation to 

the FA TF includes the Departments of State, Justice, and Homeland Security; the Board of 

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58 

Governor, of the Federal Reserve System; the Securities and Exchange Commission; other 

federal financial regulatory agencies; and federal law enforcement agencies. 

• FATF-Style Regional Bodies (FSRBs) - Through the FATF, TFI and its interagency and 

international partners havc also supported the creation and development of eight independent 

FSRBs that serve as leaders in their respective regions for advancing AMLlCFT policy, 

including by conducting periodic compliance assessmcnts of membcr jurisdictions against 

the I" A TF's AMLlCFT standards. In conjunction with the FA TF, these bodies are intended 

to establish a global framework for ensuring the adoption and implementation of the FATF 

standards. 

• IMF / World Bank - The World Bank and International Monetary Fund (IMF) have 

become strong partners of the FA TF and the Treasury Department in assessing global 

compliance with international AMLlCFT standards, and providing high-quality technical 

assistance. In 2003, the World Bank and IMF officially recognized the I" ATF 

Recommendations as one ofthe 12 Key International Standards and Codes. Since then, the 

FATF, the World Bank and IMF worked together to develop ajoint standardized 

methodology for assessing countries against the FATF Recommendations. Today, all formal 

World Bank and IMF Financial Sector Assessment Programs (FSAPs) must contain a full 

AMLlCFT component, and the World Bank, IMF, and the FA TF are coordinating to ensure 

that virtually every country in the world is subject to an AMLlCFT assessment using the joint 

methodology. 

• Group 0/20- The Group of20 Ministers have endorsed the important work of the FATF in 

combating money laundering and terrorist financing, including by calling for the FA TF to 

enhance the transparency of the international financial system and to publicly identify 

countries of concern for money laundering and terrorist finaming. TFl works with 

AMLlCFT experts in the G-20 countries to adequately respond to the G-20 calls and 

facilitate multilateral action in protecting the international financial system from abuse by 

illicit actors. 

To facilitate compliance with global AMLlCFT standards, the G-20 has called upon the FATF to 

continue to publicly identify jurisdictions that fail to meet the international standards and may 

pose a risk to the international financial system. I have had the privilege of serving as co-chair 

of the working group within the F ATF that oversees this process. Jurisdictions that have been 

identified by this process must commit to an Action Plan of ambitious reforms. lfthe refonn 

timelines specified in the Action Plans are not met, the I" A TF will issue increasingly strong 

public warnings, potentially culminating in a specific call for regulatory countermeasures from 

member countries. In responsc to this process, numerous jurisdictions have passed important 

AMLlCFT legislation, which likely would not have happened so quickly withont the 

encouragement from this I" A TF process. 

Abuse 0.( legal entities as ajimdamental challenge to financial transparency 

Despite our ongoing cfforts and longstanding commitment to promote a transparent global 

financial system and to combat money laundering and illicit finance, federal law enforcement 

7 
59 

agencies and other infonuation sources indicate thut hundreds of billions of dollars of illicit 

proceeds are generated each year in the United States from criminal offenses stemming from 

illicit drug sales, various fonus of financial fraud and tax evasion. The challenges in identifying 

and recovering proceeds of crime laundered through the U.S. and global financial system may be 

attributed in large part to ongoing and substantial criminal abuse of legal entities and a lack of 

insight into the beneficial ownership of those legal entities. These challcnges, which are 

applicable to all manner of financial crime perpetrated by TOC networks, have been exhaustively 

described in various testimonies and publications. The following provide some examples: 

• In 2007, the Departments of Jnsticc, Homeland Security and thc Treasury jointly issued the 

National Money Laundering Strategy (2007 Stratcgy), which in part, identifies current and 

emcrging trends in money laundering, as well as specific vulnerabilities. The 2007 Strategy 

specifically emphasizes the risks associated with shell companies and trusts, noting that the 

use of these entities for illicit purposes has become increasingly popular with criminal actors 

because of the "ability to hide ownership and mask financial details." The 2007 Strategy reiterates the long-standing concern regarding shell entities by the international community, 

citing a 1998 statement by the United Nations: " ... the principal fonus of abuse of secrecy 

have shifted from individual bank acconnts to corporatc bank accounts and then to trust and 

other corporate fonus that can be purchased readily without even the modest initial and 

ongoing due diligence that is exercised in the banking sector." As asserted by a 

representative of the Asset Forfeiture and Money Laundering Section of the United States 

Department of Justice (AFMLS), law enforcement faces "considerable difficulties when 

investigating U.S. shell corporations due to the lack ofbencficial ownership infonuation 

available in the United States." 

• Further, in 2006, Congress directed the Government Accountability Office (GAO) to 

examine vulr;erabilities associated with company formation in the United State~. The report 

citcs examples of abuse of the finimcial system by illicit shell company activities altd reports 

that fcderallaw enforcement officials are "concerned that criminals are increasingly using 

U.S. shell companies to conceal their identity and illicit activities," and that shell companies 

are also a way of providing access to the U.S. financial system to offshore illicit actors via 

correspondent account relationships at U.S. banks. 

Thc abuse oflegal entities is an international problem; both foreign and domestic legal entities 

can be used for illicit purposes. Viktor Bout, an international anus merchant who was 

designated by the Treasury Department's Office of Foreign Asset Control (OFAC), used U.S. 

shell companies to mask his ownership and facilitate his illegal anus trafficking activities. Law 

enforcement believes that the Sinaloa Cartel, one of the major Mexican drng trafficking 

organizations, uses both U.S. and Colombian shell companies to launder drug proceeds. 

Additionally, illicit actors use foreign shell companies to mask the involvement of designated 

persons and circumvent U.S. sanctions programs relating to Iran and North Korea. 

Treasury's 3-pronged approach 

8 
60 

Addressing the ongoing abuse of legal entities to perpetrate all manner of financial crime 

requires a broad approach. Accordingly, the Treasury Department has developed a strategy on 

beneficial ownership that has three independent, but interrelated, objectivcs. 

First, we are working to enhance the availability of beneficial ownership information to law 

enforcement regarding legal entities created in the United States. Together with our interagency 

partners and with Congress inclnding, in particular, Senator Levin, who has been a leader in 

this area - we arc working to address this issue through legislation. These efforts, guided by the 

President's Strategy, also aim to ensure that legal entities can produce a clear statement of their 

beneficial ownership to any financial institution that is seeking such information as an element of 

their customer due diligence. Increascd transparency in company formation in the U.S. will also 

improve law enforcement's ability to respond to Mutual Legal Assistance Treaty (MLAT) 

requests from foreign partners. 

Second, we plan to clarify and strengthen customer due diligence (COD) requirements for 

financial institutions with respect to the beneficial ownership oflegal entity account holders. In 

March 20 10, the Treasury Department, together with the functional financial regulators, issued 

Guidance to clarify existing regulatory expcctations for obtaining beneficial ownership 

information for certain accounts and customer relationships. We are also working with the 

regulatory and law enforcement communities, and consulting with the privatc sector, to 

determine how such due diligcnce requirements can be further clarified and strengthened as 

necessary through rulemaking or otherwise. 

Third, we are working with our international partners in the FA TF to clarify and facilitate the 

global implementation of international standards regarding beneficial ownership. As with our 

domestic efforts, our beneficial oWllership work in the F ATF focuses on both issues of legal 

entit:,' formation within jurisdictions, as well as custOlrer due diligence by financial institutions. 

We c!"ntinue to work closely within the FATF and SUPPOl"L the current u:lgoing revision to the 

FA TF recommcndations in this regard. The FATF hopes to have a new international standard 

adopted by February 2012. It is particularly important that we do not neglect this international 

effort as we move forward in addressing the issue ofbencficial ownership in the United States. 

A unilateral solution is an incomplete and ineffective solution. Without widespread global 

implementation, even if COD practices at our domestic institutions forbid dealing directly with a 

particular customer due to beneficial oWllership risk, this same customer may nevertheless seek 

to access the financial system through foreign correspondent channels. 

Conclusion 

The President's Strategy calls upon the Treasury Department to deploy our targeted tools and to 

enhance financial transparency in order to close vulnerabilities, disrupt and dismantle illicit 

financial networks, and apply pressure on transnational criminal organizations. We arc 

committed to disrupting TOC infiltration of the global economy to better protect the financial 

system, including by freezing the assets of criminal networks under our new sanctions 

authorities. At the same time, the United States remains intent on improving the transparency of 

the international financial system, which will benefit our efforts to combat all manner of illicit 

finance, including transnational organized crime. 

9 
61 

lJ.S. Senato~Chu~k Grassl~)'_. Iowa 

Ranking Member. Senate judiciary Committee 

iIIll':/ /grassley.5C1!ate.gov 

Prepared Statement of Ranking Member Chuck Grassley 

Senate Committee on the Judiciary 

Subcommittee on Crime and Terrorism 

"Combating International Organized Crime: Evaluating Current 

Authorities, Tools and Resources" 

Tuesday, November I, 2011 

Yesterday Assistant Attorney General Breuer made a public statement regar~ing an A TF case 

known as Operation Wide Receiver. In the statement, he said; 

"When the allegations related to Operation Fast and Furious became public earlier this year, 

the leadership of ATF and the U.S. Attorney's Office in Arizona repeatedly assured 

individuals in the Criminal Division and the leadership of the Department of Justice that 

those allegations were not true." . 

The Justice Department officially assured me that the allegations were not true. On February 

4,2011, the Department sent me a letter that read; "ATF makes every effort to interdict weapons that 

have been purchased illegally and prevent their transportation to Mexico." However, as Mr. Breuer's 

admissions in yesterday's statement made clear, the Department's claim was not true. 

According to documents received last night, Mr. Breuer's deputy asked the most basic 

question of Wide Receiver that anyone should have known to ask of Fast and Furious upon becoming 

aware of the number of guns involved; "[D]id ATF allow the guns to walk, or did ATF learn about 

the volume of guns after the FFL began cooperating?" In Operation Wide Receiver, around 300 guns 

were walked by ATF. In Fast and Furious, just 5 of the straw buyers were allowed to purchase 

nearly 1000 guns while an FFL was cooperating, while being watched by ATF, while their phone 

calls were being monitored by a wiretap approved by Justice Department headquarters, and while a 

prosecutor from headquarters was assigned to the case. 

The headquarters prosecutor was assigned to Fast and Furious because of an email that A TF 

Director Ken Melson sent Mr. Breuer in December 2009. Director Melson requested an attorney to 

work with ATF Phoenix Field Office on a case. Mr. Breuer said it was a "terrific idea" and assigned 

someone from the Gang Unit by March 2010. 

That same month, Deputy Attorney General Gary Grindler-now the Attorney General's 

Chief of Staff-was being briefed in person on investigative details of Fast and Furious. The 

briefing included a very detailed PowerPoint presentation from ATF, and Mr. Grindler made a 

number of hand-written notes on a print-out of the PowerPoint. The PowerPoint included such 

details as the fact that by March 12, one straw buyer had already bought as many guns as were ever 

walked in Wide Receiver. The PowerPoint also included a map of where in Mexico guns were being 

recovered and the amount of money each straw buyer had spent on the gun purchases, most in the 

tens of thousands of dollars, along with a note from Mr. Grindler saying "all cash." 

The American people--and especially the family of murdered Border Patrol Agent Brian 

Terry-deserve answers from the Justice Department about why they claim they didn't know 

gunwalking was occurring in Operation Fast and Furious when the department's fingerprints are all 

over it. 
62 

Attached Documents 

1) Justice Department's Feb. 4, 2011 letter to Senator Grassley: "ATF makes 

every effort to interdict weapons that have been purchased illegally and 

prevent their transportation to Mexico." 

2) Dec. 3-4, 2009: Assistant Attorney General Lanny Breuer approves a 

Gang Unit prosecutor being assigned to A TF gun trafficking cases at the 

request of ATF Acting Director Kenneth Melson. (HOGR ATF 2730) 

3) Mar. 1, 2010: That Gang Unit prosecutor, Joe Cooley, reports to A. TF and 

begins on Operation Fast and Furious around the time his fellow Gang 

Unit prosecutor Laura Gwinn is reporting up the chain that guns were 

walked in Operation Wide Receiver. (HOGR ATF 2155-2156) 

4) Mar. 5, 2010: Joe Cooley's handwritten notes. Cooley is briefed on 

Operation Fast and Furious as well as Operation Wide Receiver. (HOGR 

DOJ 2807-2809) 

5) Mar. 12,2010: Deputy Attorney General Gary Grindler's notes from 

briefing on Operation Fast and Furious. Grindler's notes include such 

details as the fact that by March 12, one straw buyer had bought 313 guns 

and another had bought 231; the amount of money each straw buyer had 

spent on gun purchases, most in the tens of thousands of dollars, along 

with a note from Grindler saying "all cash"; and a map of where in 

Mexico guns were being recovered. (HOGR DOJ 2817-2823) 

6) Mar. 16,2010: Deputy Assistant Attorney General Jason Weinstein asks 

the chief of the Gang Unit Kevin Carwile, to whom both Cooley and 

Gwinn report: "[D]id A TF allow the guns to walk, or did ATF learn about 

the volume of guns after the FFL began cooperating?" As Justice 

Department officials acknowledged yesterday in a widely-attended 

briefing with Congressional staff, Carwile's recollection that "they learned 

afterward" would prove to be false. (HOGR WR 3439) 

7) Apr. 30, 201 0: Weinstein tells Breuer "ATF let a bunch of guns walk in 

effort to get upstream conspirators but only got straws, and didn't recover 

many guns. Some were recovered in MX after being used in crimes." 

(HOGR WR 3485) 
63 

The Honorable Charles E. Grassley 

R&lJlcing Minority Member 

Committee on the JudiCiary 

United. States Senate 

Washington. DC 20510 

DearSenato, Grassley: 

U.S. Department of Justice 

Office or Legislnti", Affuirs 

February 4, 2011 

This responds to your letters, dated January 21, 2011 .and January 31,2011, to Acting 

Director Kenneth Melson of the Department's BUfeauof Alcohol, Tobacco, Fireanns, and 

Explosives (ATf), regarding Project Gunrunner. We appr«ciate :Your strong support for the 

Department's law ertforcemertt mission. 

At the outset, the allegation described in your January 27 letter-that ATF "sanctioned" 

or otherwise knowingly allowed the sale of'assault weapons to a straw purchaser who then 

transported th«m into Mexico-is !1llse. A TF makes every effort to interdict weapons that have 

been purchased illegally and prevent their transportation to Mexico. Indeed, an impOrtant goal of 

Project Gunrunner is to stop the flow of weapons from the Unitt.-d States to drug cartels in 

Mexico. Since its inception in 200:6, Project Gunrunner investigatiQns have seized in excess of 

lO,QOO firearms and· L I million r()unds uf ammunitiOii destined for Mexico. Hundreds of 

individuals. have treen convicted of criminal offenses arisillgfi'om these,investigations and many 

others !Ire on-going. ATF remains committed to inveStigllting and dismantling fireanns 

trafficking organizations, and will continue to pursue those cases vigorously with all available 

investigative resources. . 

In this vein, the suggestion that.Pruject Gunrunner focuses simply on straw purchasers is 

incorrect. The defendants named in the indictments referenced in your January 27 letter include 

leaders of a sophisticated gun trafficking organization. One ofthe goals of the investigation that 

led tp those indictnlents is to dismantle the entire trafficking organization, not merely to 8lTest 

straw purchasers. 

I also want to assure you that ATF has made rio attempt to retaliate against any of its 

agents regarding this matter. We recognize the importance of protecting employees from 

retaliation relating tc) their disclosures of waste,. fraud, and abuse. A TF employees receive 

annual training on their rights under the Whlstleblowet Protection Act, and those with 

knoWledge of waste, fraud, or abuse are encouraged to communicate directly with the 
64 

The Hooomble Charles E. Grassley 

Page Two 

Department's Office of lnspecror General. These protections do not negale the Department's 

legitimate interest in protllCting confidential infomtatiOllabout pending criminal investigations. 

We. also want to protectinvestigati(lns and the law enforcement personnel who directly 

conductthem from inapproprilll'epolitiCal influence. For tliis reason, _ respectfully request that 

COlllll1ittee staff not contact raw enmrc'ement perso1ll1l!l seeking infumtation about pending 

crirninaHnvesti,gatlons. iooludingtlte investjgationinto the death of Customs and Border Patrol 

Agent Brian Terry. I.-ikeyon. we are deeply wncemed by his murder,.and we ate actively 

investigating the matter. Please direct any inquiry into his killing to this (lffice. 

The Department would be pleased tq provide a briefing to Committee stafr about Project 

Ciuururmerand ATF's efforts to work with its law enIorqement partners to build cases that wJ1\ 

disri!pt and dismantle criminal o(ganizations. ThIlt briefing wmildnot address the on,going 

criminal invesllgati()n refmncedin your letter. As you know, the Department has a long. 

standing poliey against the disclosure ofnon.-puhlic: information about pet:\ding criminal 

investigations, wliihh protects the independence and effectiveness of our law enforcement efforts 

as well as the privacy and due process interests of indiViduals who mayor may not ever be 

clilll"gl:d wilhcriminal offenses, 

We hope that this infomtation is helpful and look forward to briefmg Committee staff 

about ProJect Gunrunner. Please do not hesitate tocootael this office if we may provide 

additionaJ,assistallce about this or an)' other matter. 

ce: The HOllorable Patrick J. Leahy 

Chairman 

Sil'1cete1y. 

Ronald Weich 

Assistant Attorney Ge.neral 
65 

Front: Mel~oll, KeoNeth E. 

Se»f: Pciilil),. DeCcmberM, 20091:2:26 PM 

1'1>. Back. Michelle A, 

Subj .. ~chFW: Weappmt s.eitures in Mexico 

ffOlII;Breuer, lannyA,Ii' g; i J 

Sent: Friday, December 04, 2 II); 8 A 

Til! Melso!l, Kenoetl\ E; ~: Slskef, Edward N. {OOAG) (SMO);Hoover, William J,; We,ilSteln, la&>It; ROsen, Pool; Raman, My\hlti; Fagell, Steven 

SUbjettl RE: Weapons selZuresin MeXko 

We·thlnk tills is a t;:"dficid!Ja and " !lfea~·wayfO:illllltOOcl1 the lrwestlgatlc!;s oftbllse seIZUreS. Our Gall!> Unit will be 

"s51!hirtg.~" .~t!<ltM'1 !uhelp VDtl c"crdihat~ tl>15 i!ffm!. Pf_e let u.s know Who will bIl the POC at ATF <.m.thlS, "",I we1! 

have the.6all& UmHu'ks reach <>ut to thatpen:<!n, I w<>~td tOIle ttn""Y9tl tl> d!sw •• tN. further andatner Im";s", 

(ommon ~tete-st~ I hope yau are wall 

l.nny,· We have decided·tctake a lit!le differeht approach with regard to .efzu,e. of mUltiple Weapons in Mexico. 

As5umlrig the 1I\Jl1.5 are traced, instead <If _rklng each trace.almost Independently of the other trace. from the seizure. I 

want to coordinate and mo'"it",the work on all oHhem collectillely as 1fthe' seizure was Doe case, Using the t .. ~es as 

intelligebel>, and compiling theiliformation from eath ftace Inve;tigation, we can connect the puroha,,,., Ide/ltify the 

trafffi:k!!1'li and. Use mor"s~riqus charges aga!nst.them, The intelligent/! analysis' and linking of trace.data and 

investigation results Will be.<ione'ilt HQ'Olltof outloteUfgence directorate. I would IIketa see !tval! have MY interest In 

aSsl~ln\t "·qjffilnal dMston att"mey.ti> work w\ttl thljt/JtVUpto developm\Jit,-dlvisi<HI/district casesand perhaps lIa to 

tf,et!lstrlctwnh!he best wnuetcf'n<Ui:t !h~.~.", r,n.i Iffi!ef cfactildty wUl d~pend en the num.ber of Mexican seIzures, 

ant! Whl!thertney Will tra~.,.thegtlt1s, at .mo"" us to dolt, WI! d<l seem to be makl!lg progress witl! our Me~itan 

partners, W"ire currently worklhll on a ea,,, wllI1 SSP whim might lead vs I<> tl1efirst,Jclnt arrest in Mexico'of a person 

t:llrlnectl<> us arms tra(fit:l\ing; We shotltd meet'againju,t to cat~h up on where We afe in otlr gun trafficking l>5u"$ and 

we could talk aboutthe above idea as welt let me know what you thln1<- Thanks, Ken, 

HOGRATF·002730 
66 

J.mIDl, COOJIlX,J·Q,S!fph I .. . . ..... Sent; Monday. Match 01, 20ro 1;07 PM 

To: Olllen. George T. Jr.; Voth, David 1. 

CC: O'Keefe. Kevin C.; MacAllister, HQpe A.;· Hurley, Emory (USAAZ) 

Subjeet: RE: Firearms Investigation . 

Yes, that was operation name that Kavin mlmlioned to me. I Will be available for the Friday meeting at ATF 00. 

Joseph A. Coolay 

Trial Attorney 

Garig[Jllit 

Deptartmento.!. Justice _. . 950 . N.W., 

Mr. Cooley = 

The Inves!fg1ltion yoo are r¢ferrlngto has b<!en dubbed, "The Fast alld FurlOlls.' This is an apprOVi!<! OCOETF 

inv<>stigation. I Will have lP'OUp supervisor [)avid Voth coonllnate with Vi'u to meet 0(> this Investigation. There Is a 

briefing sd!edu!~d at 1:00PM 011 Friday. Mav S, af ATF Headquarters OIl rl1is and other active. southwest bont.>r 

investigations. It may b~ most effectlve (If yoU( schedule permltsj to attend this briefing. However, I wlU have Mr. Voth 

(ontact'VOl' on your eel phone to coordinate. meeting with you before the brieflnll so you can be .ompletely up It> 

speed. 

Please don't hesitate to contact me if yoohave further questrons/concerns. 

George 1\ Gillett 

J\i;$isJant SpecIal AQtjI!l.ln Charge 

em -" •• n grsion 

GenHemen, 

At the request of A TJ? Headq~I$. Gang [Jnit has agtQed to assist In the Firearms tralflcklng Into Mexico InveS1lgationS. 

Earlier 

~ 

this year, I was assIgried to thIS task: I just finIShed up a Ilia/last week and I am now available to provide any 

neadqd. I understand thattha case agent Working Out the Phoenlx ~ is Hope McAlliSter, I c:ould not find 

l1$r in the 8ffIaft directory. Please·have her contact me at hfjr earliast convenience. 

JAC 

Josttph A. Col>Iey 

Tria! Attorney. 
67 

h 5 2010 

~Jo;e~c;oo,'~mo~n~MiarrC~'rJ~!7~~ Unit prosecutor DOJ HQ Gang . ../ I 

No., • .." by J/,IM 
68 

Notes taken by DOJ HQ Gan . 9 Umt prOsecutor Joe Co f 

o ey on March 5, 2010 

~::±-~f~=l======-

.-.--.. -.{---~Ji'~~~).---

-.-.. --.~.~ 
69 

Noles taken by DOJ HQ Gang Unit prosecutor Joe Cooley on March 5, 2010 

1---··-
70 

Notes taken by Acting Deputy Attorney General Gary Grindler on March 12, 2010 

A 1'1" Monthly Meeting 

with the Acting Deputy Aftorney Genera! 

Friday, March 12,2010 

~3. 

~4. 

HOGR DOJ 002817 
71 

Notes taken by Acting Deputy Attorney General Gary Grindler on March 12, 2010 
72 

Notes taken by Acting Deputy Attorney General Gary Grindler on March 12, 2010 
73 

Notes taken by Acting Deputy Attorney Genera! Gary Grindler on March 12,2010 

HOGR DOJ 002820 
74 

Notes taken by Acting Deputy Attorney General Gary Grindler on March 12,2010 

HOGR DOJ 002821 
75 

Notes taken by Acting Deputy Attorney General Gary Grindler on March 12, 2010 

HOGR DOJ 002822 
76 

Notes taken by Acting Deputy Attorney General Gary Grindler on ~arch 12.2010 
77 

1'''''''':. 

Sent 

To:: 

Sul>]\!tt: 

carwile, J("vin 

Tuesday, Ma;Ch 16, 2{jl{) 11;09 AM 

we~ll\ Jason 

RE: lalklng points 

My racollecllo~ is Ihey leamed altel\Yard. tlieptos memo Will be ready soon. Any IhooghtslprogreS$ Otl~ mailer? ' 

P.-~tMn~'" 

Phief, GliIfIg(Jnij 

ClimInaIOIVlSlon 

lI.*, oe~of JlfStIte 

fmm: WeInstein, JasoIl 

sent: Tuesday, Marcll16, 2010 11:04 AM 

To: Ci!!wlfe, Kevin 

SU1>jeCt: !IE: taI~ng points 

I'm: lookIng forward to readfnll tile pros nmmt>Qn Wide Receiver but am curi<>us - <lId A TF allow the guns to walk, or did 

ATFleai'n about the w!ume of .gUns after tbt\ FFl, began cooperating? 

Fromi aiJw!Ie/ Kev1n 

SI!I1t: Tuesday, Marcll16, 2010 10:47 AM TOI Weinstein, Jason 

SUbjeCt: tal~ng points 

Hera i3 a< quick pllQ$ of lalldng points .. Yall dld not describe lI1e.iJllended audience. The two operetiOl1$ ar&preIndlctmant SQ ll1e info on these matteI'S would neet! to be kept Internal. See attaehe<I. . 

P. KeVin CarWilil 

Chief. Gang Unit 

Crl!nillal Olvlslon 

U.s. Pepartmentof Juslice 

HOGR WR 003439 
78 

IIIIIII------------~--- From: 

Sent: 

To: 

Subject: 

Weinstein, Jason 

Friday, April 30, 20107:03 PM 

Breuer, lanny I\. 

Re: Operation Wide Receiver 

As you'll recall from Jim's briefing, ATf let a bunch of guns walk in effort to get upstream conspirators but only got 

straws, and didn't recover many guns. SOme were recovered in,MX afler being used in crimes; Billy, Jim, Laura, Alis. 

and I all think the best way to announce the case without highlighting the negative part ofthe story and risking 

embarrassing ATF 15 as part of Deilverance. 

Jason M. Weinstein 

Qeputy Assistant Attorney General 

Criminal DivisIOn 

U.s. DePllrtment of Justice 

950 Pennsylvania Avenue, NW waS_in on,D.C;20530 

Offlc " 

Cetl:" 

--Original Message--

From: Breuer, 'lanny A, 

To: Welnstein,Jason 

Sent: Fri Apr 30 18:39:4S 2010 

SUbject: Re: Operatfon Wide Receiver 

Anything I, should know about thos? 

- Original Message--

from: Weinstein, Jason 

To: Bretler; Lanny 1\.; Raman, Mythlli; Fagefl, Steven 

Sent: Wed Apr 2818:59:27 2010 

Subject: OperatIon Wide -Receiver 

Jim T and I met with Silly Hoover and with laura and Ailsa to talk about thIs gun trafficking case wIth the Issues about 

the guns being allowed to walk lor Investigative purposes. can illt you III ("",UHOW ill more detail but we 011 think the 

best move istu Indict both Wide Receiver I and Wide Receiver II under seal and then unseal as part of Project 

Oatll/erance, whare focus will be on aggregate seizures and not on particulars of anyone Indictment. 

Jason M. Weinstein 

Deputy Assistant AttQrn"y General 

Criminal Division 

U.S. Department of Justice 

950 Pennsylvania Avenue, NW 

HOGR WR 003485 
79 

Via Electronic Transmission 

The Honorable Hillary R. Clinton 

Secretary of State 

U.S. Department of State 

2201 C Street NW 

Washington, DC 20520 

Dear Secretary Clinton: 

November 15,2011 

I write today to request copies of diplomatic cables to and from the Department of State 

and U.S. embassies in Mexico and nations in Central America and South America that discuss 

instances of, and the overall extent of, trafficking in weapons from, to, and within those regions. 

I am aware from news reports of the existence of sucb cables. I believe that the information 

coutained in them is crucial to Congress's understanding of the threat posed by transnational 

drug trafficking organizations (DTOs) and other organized criminal groups, sucb as Mara 

Salvatrucha (MS-13). 

As the Senate Caucus on International Narcotics Control detailed in a report we issued in 

September of this year, DTOs and other criminal gronps in Mexico and Central America pose a 

national security threat both to the people ufthe United States and to the people of the countries 

where they operate.l As our report stated, "Violence in Central America ... has grown out of 

control."z Murder rales in the Central American countries are so high that "Central America has 

become one of the most violent areas of the world.'" The Administration has recognized this 

threat in its National Drug Control Strategy and its Strategy to Combat Transnational Crime, as 

well as in its support to regional governments through, among other activities, the Merida 

Initiative and the Central American Security Strategy. 

As you know, among the grave COllcerns regarding the threat posed by these criminals is 

tbat they are increasingly armed with sophisticated weapons. According to a press report, DTOs 

are "obtaining rockets and other heavy armament that make them more than a match for Central 
80 

America's weak militaries.',4 For example, according to another press report, a raid on a drug 

trafficking organization's warehouse in Guatemala City recovered 11 machine guns, a light 

antitank weapon, 563 rocket-propelled grenades, 32 hand grenades, 8landmines, and a large 

amount of ammunition.5 

According to these media reports, diplomatic cables from U.S. Embassies in Central 

America and Mexico provide significant information about these matters, including U.S. 

government assessments of the role of regional militaries in the proliferation of weapons to 

DTOs. I believe it is crucial that Congress review those cables and avail itself of the information 

contained therein as part of its duty to examine the threat to the United States posed by DTOs 

and other criminals. Furthermore, I believe that it is likely that there is relevant information on 

these matters in cables that has not been released or otherwise publicly referenced. 

Accordingly, as Co-Chairman of the Senate Caucus on International Narcotics Control, I 

request that you provide (1) the four cables specifically referenced in the reports by Tim Johnson 

of McClatchy Newspapers, entitled, "Drug gangs move into new territory: Central America," 

(April 21, 2011) and "Drug Gangs Help Themselves to Central American Military Arsenals," 

(April 21, 2011); (2) all classified and unclassified cables from U.S. Embassies in Central 

America, South America, and Mexico that address weapons trafficking-including, but not 

limited to, trafficking of military weapons in host countries, security of military weapons 

stockpiles, and U.S. assistance to host countries in preventing illicit transfer offireanns from 

military bases; and (3) all classified and unclassified cables discussing the July 2, 2010 cable 

from the U.S. Embassy in Mexico entitled, "Mexico Weapons Trafficking - The Blame Game." 

I appreciate your prompt assistance in responding to this request. Given the serious 

nature of the subject matter and the urgent need for these documents, I expect your response to 

my request no later than November 30, 2011. If any of these documents are classified, please 

transmit them to the Office of Senate Security, located at the Senate Visitors' Center, Room 217, 

and mark the documents "to the attention of Senator Grassley Co-Chairman, Senate Caucus on 

International Narcotics Control." 

Cc: The Honorable Diane Feinstein 

Chairman, Senate Caucus on 

International Narcotics Control 

Sincerely, 

Central America," (April2!, 
81 

The Iionombk D,moll E. Iss<I 

Chuinnan 

Committee on Oversight 

and Government Reform 

U.S. House of Representatives 

Washington. DC 20515 

The Iionol1l610 I'alfick J. Leahy 

Chairman 

Committee 011 the Judiciarv 

United States Senate • 

Washingtnll. DC 20510 

rhe llonorable Lamar S. Smith 

Chairmllil 

Committee on the Judiciarv 

IJ .S. Hotlse or Repre~ellta(ive, 

Washington. DC 20515 

The Attorney General 

Washington, D.C. 

October 7. 20 I ! 

The Honurable EILiah Cummings 

Ranking Minority Member 

Committee on Oversight 

and Government Refunn 

U.S. I louse of Rel)resentatives 

Washington. DC 20515 

The Honorable Charles E. Grasslcv 

Ranking Minority Member • 

Committee on the Judiciary 

United States Senate 

Washington. DC 10510 

The Honorable John Conyers. Jr. 

Ranking Minority Member 

Committee Oil the Judiciary 

U.S. llouse of Representatives 

Washington. DC 20515 

Dear M~S$fS. Chairmen and Senator Gmssley. Congressman Conyers~ ant! 

Congressman Cummings; 

I have "alched for some months now as the facts surrounding Operation Fast and Furiolls Imve 

been developed on (ile public record. 1 have not spoken at length Oil this subject oul of deference to the 

review being conducted, at my request. by OUI' Depanmenfs Inspector General. However. in the past few 

days, the public discourse concerning these issues has become so base and so harmful 10 interests that I 

hope we nil share that I must now address these issues notwithstilnding the Inspector General's ongoing 

review. 

For example. I simply cannot Sil idly by as a Majority Member "rthe 1I0use Committee on 

Oversight and Government Ref,)rnl suggeSts. as happened this week. that law enforcement and 

government employees who devote their lives \0 protecting our citizells be considered "accessories to 

murder," Such irresponsible and intlamm(llory rhetoric must be repudiated in the strongest possible 

terms. Those who serve in the ranks of la\v cnfon.~~mcnt arc our Nation's heroes and deserve our Nationl::; 

thunks. Ilot the disrespect that is being heaped on them by those who seck political advantage. I tl'US! you 

fed slm itarly and I call on you to dellounce these statements. 

I also want [() be very dear that protecting American citizens from the devastating effects l1r gun 

violence is among the most important resp<lllsibilitics of the Department of Justice. Likewise. ensuring 

tlUlI weapons sold here do nOI now south [() Mexico i, of paramoullt importance. Wc arc committed te> 

disrupting and dismantling the organizations thaI tranie weapOl1s acrnss our borders and I am proud to 
82 

The Honorable Darrell E. iSSII, The Honorable Patrick .I. Leahy, 

The Honorable Lamar S. Smith, The Honorable Elijah C'lmmings. 

Tht' HOllorable Charles E. Grassley, The HOllorable John Conyers, Jr. 

Page Two 

stand with our brave law enforcement officers who fight every day to protect Ollr citizens and those of 

Mexico from the effects of gun violence and illegal gun trafficking. 

A. Fast and Furious WIIS a Fhlwcd Response to a Serious I'roblem on the Southwest 

Border 

According to ATf', it took into evidence nationwide approximately 35,000 tirearms in FY 201 L 

In FY 2010. the number was approximately 37,500. During that same period, ATF reports that it took 

into evidence nationwide over 5 million rounds ofammunitioll. Still, the Southwest Border remains the 

n'onl linc in the battle agains! illegal gun trafllckillg, i\ 1'1' and ollr prosecutors struggle mightily to make 

C.;J,cs againsl gUll smugglers and do outstanding work on a daily basis in an etTort to stop the now of guns 

across our borders. 

Notwithstanding the seriousness oftne problem faced 011 the Southwest Border, there is no doubt 

that Operation Fast and Furious was fundamentally flawed. Regrettably, its etTects will be felt for years 

to come us weapons that should have been interdicted but were not continue to show up at crime scenes in 

this country and in Mexico. This is both tragic and completely unacceptable. 1 want to be very clear that 

we mllst aim to disrupt and dismantle the dangerous cartels that operate south of our border. That said, in 

our pursuit of that goal we must take all sleps possible to prevent guns !rom crossing our border and the 

desire In bring cartclleadcrs to justice does not and cannot justify losing track of dangerous weapons, 

For Ihnl very reason. in 2011. attcr the controversy about this matter arose, I took dt'Cisive action 

to enStlfe that such operations are never again undertaken, First, I referred the mlltter to the Department's 

Inspector General tor review so the faets underlying it could come out. Second, r instruct~'<I the Deputy 

Attorney General to reiterate to our prosecutors and law enforcement components that Department polic)' 

prohibits the design or conduct of undercover operations which include the uncontrolled crossing of guns 

across the border. In addition, new leadership is now in place both at i\ 1'10 and in the United States 

Altom.::y's Omce in Arizona. It has become clear that the llawed tactics employed in Fast and Furious 

were not limited tl) that operation and were actually employed in lin investigation conducted during the 

prior Administration. Regardless, those tactics should never again be adopted in any investigation. 

U. No Knowledge of Fast and Furious' Misguided Tactics 

Much has been made in the past few days about my congressional testimony carlie .. this year 

regarding Fast lllld Furious, My testimony was truthful and aecnrat" and I have been consistent on this 

point throughout. I have no recollection of knl1wing about Fast lind Furions or of hearing its namc prior 

to the public coulrowrsy about it. Prior to early 20 II, ! certainly never knew about the tactics employed 

in the opemtion and it is my understanding that the rortner United Stales Attorney for the District of 

Arizona <lnd the former Acting Director and Deputy Direc!or of ATF haw told Congress that they, 

themselvcs, were lltlawarc of the tactics employed, I understand that they have also told Congress that 

they Ilcvcr bricf~'<I mil or other Department leadership on the misguided tactics that were used in Fast and 

Furious. or COllr;;c, that is not surprising {tlr, as Chaiollan lsstl made clear in an interview lIll CNN just 

this week, even tlw Cormer Acting Director of AT!' "has S<lid he didn't know about" the tactics being lIsed 

in the Hcld by his agency. 
83 

The HOllorabk Darrell E. Issa, The Honorable Patrick J. Leahy, 

The Honorable Lamar S. Smith. The Honorable Elijah Cummings. 

The Honorable Charles E. Grassley. The Honorable .101m Conyers. Jr. 

Page Three 

I n the past few days. some have pointed to docllmenls thaI we provided to Congress as evidence 

that I was flulliliar with Fast and Furious earlier than I have testified. That simply is nol the case and 

those suggestions mischaracterize the process by which I receive information concerning the activities of 

the Department's many components. On II weekly basis, my oft1ee typically receives over a hundred 

pages of so,called "weekly reports' that, while addressed to me, actually are provided to and reviewed by 

members of my stafr and the staff of the Office of the Deputy Attorney General. The weekly reports 

contain short summaries of matters that the agencies deem of interest that week. Sometimes, the 

sUllll11l1ries are simply a sentence-long and other times they consist of a paragraph. (n some cases, the 

suml11aries arc of' policy,related issues or upcoming events. In other cases, the summarie!!'are briet~ highlevel reviews of pending matters or investigations. It is important to look at the documents supposedly at 

issue here and, for that reason, ! have attached them 10 this letter and am making them puhlic in the form 

they previously wefe provided by us to Congress. Please note tilal none of these slimmaries say anything 

about the unacceptable tactics employed by ATF. 

Attorneys in my olliee and in the Office of the Deputy Attorney General review these weekly 

reports and bring 10 my attcntion only those matlers deemed to require my consideration or action; given 

the volume of material to wbich I must devote my attention, I do 110t and cannot read them cover,tocover. Here. 110 issues concerning fast and Furious were brought to my attention because the information 

presented ill the reports did not suggest a problem. Rather, the entries suggest active law enforcement 

action being taken to combat n firearms-trafficking organizutionlhal was moving weap()ns to Mexico. 

For example. the A TF weekly rcpon for July 19,23,20 I 0 briefly described the seizure in Phoenix of 73 

firearnls and 250 AK-47 drum magazines from a local business as part of Operation Fast and Furious, 

again with no mention of any unacceptable taclic~. 

If a component oflhc Department has cOllcerns about a panicular matter, there are established 

avenues for raising them with my oftice or that of the Deputy Attorney General and a weekly report is not 

one of them. As Attorney General, I am not and cannot be familiar with the operational details of any 

particular investigatioll being conducted in an AT!' field offIce unless those details are brought to my 

attention. That did not happen with Fast and Furious until the public controversy arose in 20 It. 

Senator Grasslcy has suggested that I was aware of Operation Fast and Furious from letters he 

provided to me on or about January 31, 20 II that were addressed I() the former Acting Director of ATf'. 

However, those letters referred only to an ATF umbrella initiative Oil the Southwest Border that started 

under the prior Administration .. Project Gunrunner -, and not 10 Operation Fast and Furious. 

To be sure. during 20 I 0 I knew generally that ATF was conducting gun trafficking operations 

along the Southwest Border and elsewhere in the country since Ihat is II core part of its mission given the 

large number of firearms flowing to Mexico each year from the United States. t also was aware of the 

existence of Project Gunrunner. More specifically. however, I now understand some senior oft1cials 

within the Department were aware at the time thaI there was an operation called Fas! and Furious 

although they were not advised of the unacceptable operulionallactics being used in it. For example, I 

understand that we have provided to Congress materials Ii'om a March 2010 monthly meeting between the 

then-Acting Deputy Attorney General and senior ATF olllcial, that included disclission of Fast and 
84 

Th.: Honorable Darr.:!l E. lssa. 'l11e Honorahle Patrick 1. Leahy. 

The Honorable Lamar S. Smith. The Honorable Elijah Cummings. 

The Honorable Charles E. Grassley. The Honorable John Conyers, Jr. 

Page Four 

Furious. That meeting. of course. occurred shortly before Chainnall Issa received his own briefing 

regarding Fast and Furious from some of the same A TF officials. I am aware that Chairman \5S1I has said 

that he was 110t brieted on the unacceptable details of Fast and Furious. Like Chairman lssa, the thenActing Deputy Attorney General was not told of the unacceptable tactics employed in the operation in his 

regular monthly meetings with A 1'1" to discuss its activities throughout the Unit~-d States and ,\broad, 

C. Congress Has Failed to COllsider Wbt.'thcr AdditiOllal Tools Arc Needed to Stem the 

Flow oCGuus into Mexico 

A TF witnesses [estilled before the House Committee on Overs"ight and Government Reform that 

the llgency's ability to stem the now of guns from the United States into Mexico is severely impaired by a 

lack of effective law enforcement tools, For example. a number of witnesses indicated that current 

penulties for illegal straw purchases arc inadequate to deter such activity or to induce cooperation with 

law enforcement authorities after a violation is detected. Likewise. the lack of reponing requirements lor 

multiple long gun purchases in II short period of time hindered law enforcement efforts to combat gun 

trafficking. Yet. the House of Representatives has voted to block a rule that requires such reporting Ol1 

the Southwest Border. 

As I have said, the tllet that even a single gun was not interdicted in this operation and fonnd its 

way to Mexico is unacceptable. Equally unacceptable, however, is the fact that too many in Congress are 

opposed to any discussion of fixing loopholes in our laws that facilitate the staggering flow of guns each 

year across our border to the south. I cannot help but note that at the same lillie that some members of 

Congress undcr:;tandably criticize the Fast and Furious operation. they vehemently refuse to consider 

whether ATF has the resources lind legal tools it needs to do its job -. tools that would be entirely 

consistent with the constitutional rights of law-abiding citizens. 

A telling moment in this regard came duril1g one of the Fast iind Furious hearings held by the 

House Committee on Oversight and Government Rcfonll when Representative Maloney sought to 

question an ATF witness about potential reforms to our laws that would help stem the flow of illegal 

weapons. Representative Maloney was cut-off in mid-sel1lCllce by Chairman Issa. who then "cautioned" 

the witness that it would not be "valid testimony" 10 respond to such questions because the Committee 

was not interested ill "proposed legislation and the Iike[.}" While failing to interdict weapons is an 

unacceptable tactic to stop the !low of i IIcgal weapons. it seems clear that some in Congress are more 

interested ill using this regrettable incident to score pOlitical points than in addressing the underlying 

problem, Even in the tilee of an unprecedented now of gUlls across the border, too many in Congress still 

oppose every ellorllo refornl our gun laws in ways that would make the United States and our Mexican 

neighbors sater. 
85 

The Honorable Darrell E. (ssa, The Honorable Patrick J. Leahy, 

The Honorable Lamar S. Smith, The Honorable Elliah Cummings, 

The Honorable Charles E. Grassley, The Honorable John Conyers, Jr. 

Page Five 

Vlllil we move beyond the curren! political climate -- where real solutions take a back seat to both 

political posturing and making headlines 011 cable news programs, and is deemed more important than 

l1cwally solving our country's difficult challenges -- nothing is going to change. I hope we can cngage in 

a more responsible dialogue on this subject in the fn!ure. There is much we allnced to do together to stop 

gun violence on both sides of the border and make our Nation saier. 

Eric H. Holder, Jr. 

Enclosures 
86 

u.s. Immigration 

and Customs 

Enforcement 

STATEMENT 

OF 

KUMAR C. KIBBLE 

DEPUTY DIRECTOR 

U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT 

DEPARTMENT OF HOMELAND SECURITY 

REGARDING A HEARING ON 

"COMBATING ORGANIZED CRIME: EVALUATING CURRENT AUTHORITIES, 

TOOLS, AND RESOURCES" 

BEI<'ORETHE 

UNITED STATES SENATE 

COMMITTEE ON THE JUDICIARY 

SUBCOMMITTEE ON CRIME AND TERRORISM 

Tuesday, November 1, 2011 

10:00AM 

226 Dirksen Senate Office Building 

Washington, DC 20510 
87 

INTRODUCTION 

Chairman Whitehouse, Ranking Member Kyl, and distinguished Members of the 

Subcommittee: 

On behalf of Secretary Napolitano and Director Morton, I would like to thank you for the 

opportunity to discuss the role of U.S. Immigration and Customs Enforcement (ICE) Homeland 

Security Investigations (HSI) in combating transnational organized crime. ICE has the most 

expansive investigative authority and largest team of investigators in the Department of 

Homeland Security (DHS). With more than 20,000 employees and a budget of$5.7 billion, ICE 

has nearly 7,000 HSI special agents assigned to more than 200 cities throughout the United 

States and 70 offices in 47 countries worldwide. ICE is uniquely positioned and exclusively 

devoted to disrupting and dismantling transnational criminal networks by targeting the illicit 

pathways and organizations that engage in human smuggling and produce, transport, and 

distribute illicit contraband. 

ICE targets transnational criminal organizations at every critical phase in the cycle: 

internationally in cooperation with foreign counterparts, where transnational criminal and 

terrorist organizations operate; at our nation's physical border and ports of entry (POEs) in 

coordination with U.S. Customs and Border Protection (CBP), where the transportation cells 

attempt to exploit America's legitimate trade, travel, and transportation systems; and in cities 

throughout the United States, where criminal organizations earn substantial profits off the 

smuggling of aliens and illicit goods. 

Over the last two decades, transnational organized crime has expanded dramatically in 

size, scope and impact-posing a significant threat to national and international security. In 

response, earlier this year, the Administration launched its new Strategy to Combat Transnational 

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88 

Organized Crime (TOC Strategy). In his written message to the Strategy, President Obama 

states that the Strategy is organized around a single, unifying principle: to build, balance, and 

integrate the tools of American power to combat transnational organized crime-and urge our 

partners to do this. DHS and ICE fully support this principle to bring together best practices 

from international, federal, local, state and tribal law enforcement in order to combat 

transnational organized crime and related threats to our national security. The Strategy sets out 

six priority actions. The first starts at home by taking shared responsibility and swift action 

within our own borders to combat TOC domestically and to lessen its impact on our international 

partners; enhance intelligence and information sharing; protect the financial system and strategic 

markets against transnational organized crime; strengthen interdiction, investigations, and 

prosecutions; disrupt drug smuggling and human trafficking and its facilitation of other 

transnational threats; and build international capacity, cooperation, and partnerships. 

ICE Response to the Strategy to Combat Transnational Organized Crime 

ICE takes very seriously the threat to natioml security that transnational organized crime 

represents. ICE developed a robust implementation plan called the Illicit Pathways Attack 

Strategy (IPAS). ICE designed the IP AS to focus its resources in a manner that best targets, 

disrupts, and dismantles transnational organized crime while maximizing efficiency. The IP AS 

provides a methodology and mechanism for ICE to prioritize threats and vulnerabilities within its 

mission and to coordinate its own efforts internally and among our Federal partners. Ultimately, 

the IPAS will enhance ICE's and host country partners' abilities to investigate and prosecute 

individuals involved in transnational criminal organizations that threaten the stability and 

national security ofthe host countries and pose continuing threats to the homeland security of the 

United States. 

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89 

Prioritization allows ICE to strategically focus enforcement and capacity building efforts 

along the continuum of crime within and beyond our borders. IPAS provides a structure for 

engagement with host country partners to increase joint investigations, enhance exchange of 

information, and support foreign and domestic prosecutions. The IP AS is built upon principles 

of: 

Attacking criminal networks within and beyond our borders; 

Prioritizing networks and pathways that pose the greatest threats; 

• Participating and facilitating robust interagency engagement; and 

• Pursuing a coordinated regional approach that leverages foreign partners. 

ICE uses a risk-factor based methodology to identifY converging networks, routes and 

infrastructure used by multiple criminal organizations. In particular, ICE prioritizes its efforts on 

attacking convergence points and vulnerabilities along the illicit travel and transport continuum. 

ICE uses traditional law enforcement techniques as well as high tech analytical tools like 

biometric data collection. 

At ICE, we work hard to collaborate with federal, state, local and tribal partners at every 

opportunity. A coordinated strategy of attacking criminal networks at multiple locations along 

the illicit travel continuwn will reduce pressure on law enforcement resources and assist partner 

nations in preventing or disrupting organized alien smuggling within their own territories. The 

ICE led National Intellectual Property Rights Coordination Center (IPR Center), ICE's Bulk 

Cash Smuggling Center, the Drug Enforcement Administration (DEA) Special Operations 

Division, Department of Defense Combatant Commands, DEA's El Paso Intelligence Center 

(EPIC), the Organized Crime Drug Enforcement (OCDETF) Fusion Center, the Organized 

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90 

Crime Intelligence and Operations Center (IOC-2), and the National Countetterrorism Center are 

all examples of this coordinated, collaborative effort. 

The Administration's Strategy makes clear that due to U.S. and international pressure, 

terrorists increasingly are turning to crime and criminal networks to fund and facilitate their 

illicit activities. A threat of particular concern is the convergence of terrorist travel and human 

trafficking. One recent case exemplifies this trend that we will continue to address through the 

IP AS. An HSI Attache Quito terrorist mobility investigation was conducted jointly with HSI 

Atlanta, the Department of Justice, and the FBI, as well as Ecuadorian authorities through the 

HSI Quito Transnational Criminal Investigative Unit (TCIU). The investigation focused on a 

criminal travel network engaged in facilitating the illicit transnational movement of suspected 

members of terrorist organizations like AI Qaeda, Tehrik-i-Taliban Pakistan (TTP), and Jaish-eMohammed. 

In September 2011, three Pakistani citizens pleaded guilty in the District of Columbia to 

one count each of conspiraey to provide material support to the Tehrik-I-Taliban (TTP), often 

referred to as the Pakistani Taliban, a designated foreign terrorist organization. Sentencing is 

scheduled for December 9, 2011; each defendant faces a maximum sentence of 15 years in 

prison and a fine of up to $250,000. As part of their plea agreements, the defendants have agreed 

to a stipulated order of removal to Pakistan upon the completion of their criminal sentences. 

Between January 3, 2011, and March to, 2011, the three conspired to provide material 

support to the TTP in the form of false documentation and identification, knowing that the TTP 

engages in terrorist activity and terrorism. According to court documents, they conducted a 

human smuggling operation in Quito, Ecuador, during which they attempted to smuggle an 

individual they believed to be a member of the TTP from Pakistan into the United States. Court 

5 
91 

documents indicate that law enforcement agents directed confidential sources to ask the 

defendants, who were residing in Ecuador at the time, for their assistance in smuggling a 

fictitious person from Pakistan to the United States. Over the course of the ensuing negotiations, 

the defendants were made aware that the person to be smuggled was a member of the TIP who 

was blacklisted in Pakistan. The defendants agreed to move this person from Pakistan into the 

United States, despite his purported affiliation with the TTP, and accepted payment from the 

confidential sources for the smuggling operation and procured a false Pakistani passport for the 

purported TTP member. The three individuals were arrested in Miami on March 13,2011, on 

conspiracy to commit alien smuggling and then pleaded guilty to terrorism conspiracy charges. 

The investigation, carried out in conjunction with the Government of Ecuador, was 

conducted under the Extraterritorial Criminal Travel Strike Force (ECT) program, a joint 

partnership between the lustice Department's Criminal Division and HSI with invaluable support 

from the Criminal Division's Office ofInternational Affairs, the U.S. National Central Bureau of 

INTERPOL, .CBP and the US. Embassy in Quito. The ECT program focuses on human 

smuggling networks that present national security or public safety risks or present grave 

humanitarian concerns. 

Securing and Managing our Borders Against Illicit Trade, Travel, and Finance 

The Southwest Border Initiative 

In March 2009, the Administration launched the Southwest Border Initiative to bring 

unprecedented focus and intensity to Southwest Border security. In support of this initiative, 

ICE targeted considerable resources at the Southwest Border to address the activities associated 

with transnational criminal organizations, ineluding the interdiction of contraband such as 

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92 

firearms, ammunition, bulk cash currency, and stolen vehicles; human smuggling; human 

trafficking; and the detection of tunnels and other border crime at and between ports of entry 

along the Southwest Border. Under this initiative, ICE has: doubled the personnel assigned to 

the Border Enforcement Security Task Forces (BESTs); increased the number of intelligence 

analysts along the Southwest Border focused on cartel violence; and tripled deployments of 

Border Liaison Officers to work with their Mexican counterparts. Indeed, ICE now has one 

quarter of its personnel assigned to the Southwest Border-more agents and officers along the 

border than ever before. 

As part of this Initiative, ICE has collaborated with the Department of Health and Human 

Services (HHS) on prevention and treatment approaches that speeifically target drugs being 

smuggled across the southern border and the populations abusing these drugs. Reducing the 

local demand for illicit drugs through prevention and treatment will in tum reduce the quantity of 

drugs smuggled across the border. 

Border Enforcement Security Task Forces (BESTs) 

ICE continues to expand the BEST program, which currently operates in 22 locations 

throughout the United States and Mexico. BEST leverages over 650 federal, state, local, and 

foreign law enforcement agents and officers representing over 85 law enforcement agencies and 

provides a co-located platform to conduct intelligence-driven investigations to identify, disrupt 

and dismantle criminal organizations posing significant threats to border security. In fiscal year 

(FY) 2011, ICE-led BESTs made 2,119 criminal arrests, 1,121 administrative arrests, and federal 

and state prosecutors obtained 1,079 indictments and 998 convictions in BEST-investigated 

cases. 

7 
93 

In 2009, Secretary Napolitano announced the formation of the first-ever Mexico-based 

BEST to facilitate the exchange of law enforcement information and to support the joint 

investigation of criminal activity that falls within ICE's purview. These crimes include weapons 

and munitions smuggling, money laundering, human smuggling, human trafficking, customs 

fraud, and cybercrime violations. The Mexico City BEST includes both Mexican law 

enforcement officers and prosecutors working collaboratively with ICE and other United States 

government staff to share information and expertise in cooperative investigations. 

International Partners and Cooperation 

With 70 offiees worldwide, ICE works closely with our federal agency and international 

partners to disrupt and dismantle transnational criminal organizations. As part of these efforts, 

ICE currently maintains nine Transnational Criminal Investigative Units (TCIUs) worldwide. 

These units are composed of highly trained host country counterparts who have the authority to 

investigate and enforce violations oflaw in their respective countries. Because ICE off:cids 

working overseas do not possess law enforcement or investigative authority in host countries, the 

use of these TCIUs enables ICE to disrupt, dismantle, and prosecute transnational criminal 

organizations while respecting the sovereignty of the host country. 

In FY 2010, ICE's international partners played a central role in Operation Pacific Rim. 

Working closely with the Colombian National Police, Mexican authorities, and our partners in 

Ecuador and Argentina, as well as the FBI and DEA, ICE led an investigation that spanned the 

globe and effectively disrupted one of the most powerful and sophisticated bulk cash and drug 

smuggling organizations in the world. The case began when HSI and Colombian police 

intercepted a suspicious shipment of what was supposed to be fertilizer, but was instead bundles 

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94 

of shrink-wrapped cash. HSl's E1 Dorado Task Force coordinated the investigation; the task 

force targets financial crime at all levels and consists of 260 members oflocal, state, and federal 

law enforeement, intelligenee analysts, and federal prosecutors. As a result of law enforcement 

eooperation, both domestie and international, this operation resulted in 10 eonvictions, 21 

indictments and seizures totaling more than $174 million in cash, 3.8 tons of cocaine and $179 

million in property. 

During 2011, two more TCIUs became operational and ICE plans to expand additional 

TCIUs in FY 2012. 

In 2009, ICE partnered with the Department of State Burcau of International Narcotics 

and Law Enforcement Affairs (INL) to organize the Trans-Pacific Symposium on Dismantling 

Transnational Illicit Networks. This meeting brought together 25 countries and jurisdictions 

from across the Pacifie to explore eommon approaches and strengthen cooperation against 

transnational criminal networks that span East Asia, the Pacific and Latin America. The 

Sympo~ium acted as a platform to launch a number of joint INLlICE international projects. By 

building cooperative platforms and networks, the U.s. will generate greater collective action, 

joint cases, and common strategic approaches with our international partners to eombat 

converging transnational criminal threats. 

ICE Enforcement Efforts 

Counter-proliferation Investigations 

ICE is charged to prevent foreign adversaries from illegally obtaining U.S. military 

products and sensitive technology, including weapons of mass destruction and their components. 

ICE is a leading law enforcement agency responsible for investigating U.S. export control law 

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95 

violations, including all U.S. export laws relatcd to military items, controlled "dual-usc" 

cormnodities and sanctioned or embargoed countries. In FY 2011, ICE initiated 1,780 ncw 

invcstigations into illicit procurement activities, made 583 criminal arrests, and made 2,332 

seizures valued at $18.9 million. 

In 2010, ICE, in coordination with the World Customs Organization (WCO), launched 

"Project Global Shield," an unprecedented multilateral law enforcement effort aimed at 

combating the illicit eross-border diversion and trafficking of precursor chemicals used by 

terrorist and other criminal organizations to manufacture improvised explosive devices by 

monitoring their cross-border movements. On June 23, 20 II, Global Shield was endorsed by the 

WCO Council and expanded from a pilot project to a long-term program. It currently has 83 

participating countries and has led to 19 arrests, 24 seizures, and chemical seizures totaling over 

33 metric tons. 

In November 20 I 0, President Obama issued an Executive Order directing the Seeretary 

of Homeland Security to estabJ;sh the interagency Export Enforcement Coordination Center 

(EECC) to be led by ICE. The EECC will streamline matters relating to export enforcement by 

coordinating among CBP, the Departments of Homeland Sccurity, State, Commerce, Treasury, 

Defense, Justice, Energy, the Offiee of the Director of National Intelligence, and other executive 

braneh departments, agencies, or offices as the President may designate. Once fully operational, 

the center, which will be managed and operated by ICE, will enhance the United States' ability 

to combat illicit proliferation and serve as a hub for exchanging information and intelligence 

related to export enforcement. 

An example of a successful international case involves the illegal transshipment of dualuse technology to Iran. ICE's counter-proliferation efforts uncovered a scheme by a proliferator in 

Canada to obtain and export materials to Iran for use in the production of nuclear materials. On July 

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96 

29,2010, Mahmoud Yadegari was sentenced in a Canadian court to four years and three months' 

incarceration for attempting to export pressure transducers (which have applications in the 

production of enriched uranium, a critical stcp in creating nuclear energy and weapons) to Iran. He 

purchased the pressure transducers from a U.S. company. He then had them exported to Canada 

whcre he attempted to forward them to Iran through the United Arab Emirates. Company officials in 

Massachusetts alerted ICE to the purchases, and ICE, in turn, coordinated its investigation with 

Canadian authorities. 

Human Trafficking and Smuggling Investigations 

ICE works with our interagency and international partners to improve transnational law 

enforcement cooperation and disrupt and dismantle international human smuggling and 

trafficking networks and organizations along their entire routes. ICE holds the directorship of 

the Human Smuggling and Trafficking Center (HSTC), an interagency infonnation and 

intelligence fusion center and clearinghouse. The HSTC was established to facilitate the broad 

dissemination of anti-smuggling and trafficking infonnation and hclp coordinate the U.S. 

Government's efforts against human smuggling, human trafficking and criminal facilitation of 

terrorist mobility. 

Recently, ICE's Office ofIntelligence established a Human Trafficking Unit to develop 

intelligence and identify potential human trafficking invcstigative targets. In the coming fiscal 

year, ICE plans to expand coordination with the Departments of Justice and Labor to initiate 

additional investigations of human trafficking violations. In addition, in July 2010, the DHS 

launched the Blue Campaign to coordinate and enhance the Department's efforts to combat 

human trafficking. The Campaign harnesses and leverages the varicd authorities and resources 

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97 

of DHS to deter human trafficking by increasing awareness, protecting victims, and contributing 

to a robust criminal justice response. ICE is an active participant in this campaign. 

Sadly, a significant number of human trafficking victims are children. ICE takes these 

cases very seriously. ICE's "Operation Predator" targets and investigates human smugglers and 

traffickers of minors, as well as child pornographers, child sex tourists and facilitators, criminal 

aliens convicted of offenses against minors, and those deported for child exploitation offenses 

who have returned illegally. Since its launch in 2003, Operation Predator has resulted in the 

arrest of over 13,594 sexual predators, of which 10,975 were non-U.S. citizens. 

Our efforts to dismantle transnational criminal organizations are producing tremendous 

results. One example is "Operation In Plain Sight," a targeted investigation focused on 

dismantling a human smuggling network that used transportation companies, referred to as 

"shuttle companies," to facilitate the smuggling and transportation of aliens away from our 

borders to the interior of the United States. The bi-national investigation, which included 

unprecedented cooperation with Mexico's Secretaria Seguridad Publica and marked the most 

comprehensive human smuggling investigation in ICE history, ultimately implicated high level 

members of human smuggling organizations in Phoenix, Tucson, and Nogales, Arizona, and in 

northern Mexico. Specifically, Operation In Plain Sight resulted in: nearly 50 criminal arrests 

and more than 40 administrative arrests; seizures of illicit weapons, cash, and vehicles; and the 

initiation of other promising investigations of criminal organizations in Mexico - effectively 

dismantling an entire criminal enterprise engaged in smuggling through Arizona. 

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Combating Intellectual Property (IP) Theft 

ICE is a leading agency in the investigation of criminal intellectual property violations 

involving the illegal production, smuggling, and distribution of counterfeit and pirated products, 

as well as associated money laundering violations. Led by ICE, the IPR Center, located in 

Arlington, Virginia, brings together 19 relevant federal and international partners to efficiently 

and effectively leveragc resources, skills and authorities to provide a comprehensive response to 

IP theft. The mission of the lPR Center is to address the theft of innovation that threatens U.S. 

economic stability and national security, undermines the competitiveness of U.S. industry in 

world markets, and places the public's health and safety at risk. 

The IPR Center is leading an effort to educate the public and other audiences about IP 

theft and its connection with transnational organized crime. In June 2010, the IPR Center hosted 

a symposium titled "IP Theft and International Organized Crime and Terrorism: The Emerging 

Threat." Panels of academics, industry leaders and domestic and international government 

offici~.Is <iiscussed links between transnational organized crime, terrorism al1il IP theft. 

ICE's IP theft enforcement efforts have continued to increase under this Administration. 

In FY 2010, ICE initiated 1,033 intellectual property infringement cases-a 42 percent increase 

over FY 2009-and achieved 365 arrests. In that same year, criminal charges were brought 

against 216 defendants, and 170 defendants were convicted in connection with ICE-investigated 

cases. Tn FY 2010, indictments returned in connection with ICE-initiated intellectual property 

investigations increased by 86 percent over the previous ycar. These figures include both federal 

and state prosecutions. 

13 
99 

Transnational Gangs 

Transnational gangs often conspire with other dangerous criminal organizations, which 

allow them to mature from small autonomous criminal groups into larger, international criminal 

enterprises engaged in human smuggling and trafficking, narcotics smuggling and distribution, 

money laundering, weapons smuggling and arms trafficking, kidnapping, extortion, and export 

violations. 

Operation Community Shield, an ICE-led anti-gang program, combines ICE's statutory 

and administrative enforcement authorities with our law enforccment partnerships. Community 

Shield increases public safety by combating the growth and proliferation of transnational gangs 

in communities throughout the United States, and ICE conducts targeted enforcement operations 

using criminal arrcst and administrative removal authorities against gang members, thereby 

disrupting the ability of gangs to operate. In addition, these targeted enforcement operations lead 

to the development of information critical to the successful prosecution of transnational gang 

members for conspiracy and racketeering related violations. Since its inception in 2005, 

Operation Community Shield has led to the arrests of more than 23,090 gang members and 

associates, 8,735 of whom had prior violent criminal histories. In addition, 266 gang leaders 

have been arrested and 2,140 weapons have been seized. 

In February 2011, ICE completed "Project Southern Tempest," the largest ever 

Homeland Security Investigations-led national initiative targeting gangs with ties to Mexican 

drug trafficking organizations. The ICE National Gang Unit initiated Project Southern Tempest 

under the auspices of Operation Community Shield to combat the national security and public 

safety threats posed by transnational street gangs conducting business on behalf of Mexican drug 

trafficking organizations in the United States. Southern Tempest was executed in 168 U.S. cities 

14 
100 

side by side with 173 of our federal, state, and 10Callaw enforcement partners, and led to the 

arrest of 678 gang members and associates. More than 46 percent of those arrested during this 

operation were members or associates of gangs with ties to Mexican trafficking organizations. 

Of those arrested, 447 were charged with criminal offenses and 322 had violent criminal 

histories. Southern Tempest also led to several significant seizures from gang members and 

associates, including 86 firearms. 

Foreign Corruption Investigations 

Large-scale cormption on the part of public officials in other nations, particularly 

developing nations, poses a significant threat to public trust and government infrastructure. In 

many cases, public corruption exists in unstable environments in which criminal and terrorist 

organizations flourish. In response, ICE creatcd thc Foreign Corruption Investigations Group, 

which pursues cormpt foreign officials who plunder state coffers for personal gain and then 

attempt to plar;e those funds in the U.S. financial system. 

ICE participates in the overall U.S. government response to the issue of large-scale 

foreign public corruption as a member of an ad hoc anti-kleptocracy working group. ICE plays 

an integral role in developing the government-wide anti-kleptocracy strategy due to the agency's 

expertise in investigating international money laundering and enforcing customs and 

immigration law. Since the inception of the Foreign Comlption Investigations Group, ICE has 

initiated morc than 182 investigations, made 80 criminal arrests, and seized more than $131 

million associated with foreign corruption. 

15 
101 

Money Laundering and Bulk Cash Smuggling Investigations 

One of the most effective methods for dismantling transnational criminal organizations is 

to attack the criminal proceeds that fund their operations. ICE investigations utilize a "supply 

chain attack" stratcgy designed to trigger cascading failures within a criminal organization by 

simultaneously targeting multiple components within the organization. 

The combination of successful financial investigations, reporting requirements under the 

Bank Secreey Act, and anti-money laundering compliance efforts by financial institutions has 

strengthened formal financial systems and forced criminal organizations to seek other means to 

diversify the movement of illicit funds. ICE-as the investigative agency with jurisdiction over 

all crimes with a clear and direct nexus to U.S. borders-investigates money laundering and bulk 

cash smuggling violations. From FY 20 I 0 to date, ICE has made 345 arrests for bulk cash 

smuggling under 31 U.S.C. § 5332. In that same time period, 261 defendants were convicted in 

federal court for this same offense. 

Operation Firewall 

ICE's Operation Firewall disrupts the movement and smuggling of bulk cash en route to 

the border, at the border, and internationally via commercial and private passenger vehiclcs, 

commercial airline shipments, airline passengers and pedestrians. Since 2005, we have enhanced 

Operation Firewall efforts to include surge operations targeting the movement of bulk cash 

destined for the Southwest Border to be smuggled into Mexico. Since its inception in 2005, 

Operation Firewall has resulted in more than 5,833 seizures totaling more than $567.2 million, 

and the arrests of 1,223 individuals. These efforts include 386 international seizures totaling 

more than $258.4 million and 258 international arrests. 

16 
102 

ICE's National Bulk Cash Smuggling Center 

ICE's bulk cash smuggling investigations are coordinated through the ICE-led Bulk Cash 

Smuggling Center, through which we provide real-time operational support to federal, state, and 

local officers involved in bulk cash smuggling seizures 24 hours a day, 7 days a week. Since its 

inception in August 2009, the BCSC has initiated 446 investigations, which have resulted in 

more than 183 criminal arrests, 57 indictments, and 39 convictions. 

CONCLUSION 

Thank you again for the opportunity to appear before you today and for your continued 

support ofICE and its law enforcement mission. ICE is committed to enhancing public safety 

and dismantling transnational criminal organizations through efforts such as those I have 

discussed here today. We look forward to continuing our good work, refining our existing 

programs and partnerships and collaborating with our federal, state, local and tribal partners to 

ensure the safety and security of all Americans. 

I would be pleased to answer any questions you may have. 

17 
103 

Introduction 

SUBCOMMITTEE ON CRIME AND TERRORISM 

SENATE JUDICIARY COMMITTEE 

Opening Statement of Senator Jon Kyl 

"Combating International Organized Crime: 

Evaluating Current Authorities, Tools, and Resources" 

I November 2011 

Chairman Whitehouse, thank you for holding this hearing. 

As the world becomes more globalized, we know that organized crime no 

longer poses a strictly local or regional threat to the societies in which it is found. 

Increasingly, it is a global problem and, as such, the United States must increase its 

vigilance and step up efforts to combat transnational organized crime and the 

associated - and growing threats it poses to our national security. Specifically, 

I would like to focus my remarks on the need to strengthen efforts to interdict, 

investigate, and prosecute transnational organized crime and its perpetrators, as 

well as the need to disrupt transnational drug trafficking. 

Strengthening Interdiction, Investigations, and Prosecutions 

As a senator from Arizona, I intimately understand the problems associated 

with cross-border crime along the border with Mexico. We must continue to 

pursue vigorous interdiction efforts to ensure that our borders are secured and the 

public is not threatened. I have been a supporter of innovative border enforcement 

efforts in the past (such as BEST, the Border Enforcement SecUlity Task Force), 
104 

and I urge President Obama to make organized crime on our southern border a top 

priority. 

Recently, this subcommittee heard testimony about the threat posed to our 

nation by terrorist financing activities. Just as terrorist-affiliated organizations 

continuously evolve to evade domestic and international law enforcement efforts, 

so too do transnational organized criminal groups. It is of utmost importance that 

our investigative and prosecutorial tools reflect the criminal threats we face. I have 

long worked hard to ensure our law enforcement agencies have the statutory 

framework and legal tools necessary to fight transnational criminal activity. I 

stand ready to continue that work today. 

Disrupting Drug Trafficking 

The sale and use of illegal narcotics continue to threaten the health and 

security of every American. We must diminish these threats by maximizing the 

use of current legislation (such as the Foreign Narcotics Kingpin Designation Act) 

by blocking all property and interests in property, subject to U.S. jurisdiction, 

owned or controlled by significant foreign narcotics traffickers. This act, and 

others similar to it, will also aid in the prosecution of persons involved in illegal 

activities linked to drug trafficking. 

The fight against drug trafficking is also a fight against terrorism. Many 

drug trafficking organizations are not pushing drugs just for financial ends, but 

look to use that money as a means to further their terrorist aims. That is why we 

must utilize our intelligence agencies more effectively to combat trafficking outfits 

in Mexico, South America, Europe, Asia, and in particular the Middle East 

and Africa. Disrupting the funding for this crime-terror relationship will serve a 

- 2 -
105 

dual purpose in decreasing the amount of drugs that come into our country while 

also undercutting the ability of terrorist groups to be successful. 

I also remain deeply concerned about the intersection of transnational 

organized crime and WMD proliferators. We know that those who peddle 

narcotics, counterfeit cigarettes, or nuclear weapons-related materials and 

equipment rely on many of the same facilitators, bankers, smugglers, front 

companies, and transportation networks to conduct illicit activities. The U.S. 

government knows all too well that states such as North Korea earn desperately 

needed hard currency from a combination of criminal activities and illicit 

proliferation. I look forward to hearing from the witnesses today on the 

administration's efforts to disrupt the dangerous nexus between transnational 

organized crime and WMD proliferators. 

Conclusion 

The fight against transnational organized crime is an important one. 

Today's hearing will consider the administration's efforts to disrupt and deter this 

pernicious activity. I look forward to learning more about the administration's 

strategy to combat transnational organized crime in all of its forms, and I look 

forward to hearing from the witnesses that are to testifY before the Subcommittee 

today. 

### 

- 3 -
106 

NEWS FROM U.S. SENATOR SHELDON WHITEHOUSE 

FOR IMMEDIATE RELEASE 

November 1, 2011 

Contact: Seth Larson 

(202) 228-6293 (press office) 

press@whitehouse.senate.gov 

Opening Statement of Senator Sheldon Whitehouse 

Crime and Terrorism Judiciary Subcommittee Hearing 

"Combating International Organized Crime: 

Evaluating Current Authorities, Tools, and Resources" 

As Prepared for Delivery 

Washington, D.C . . - Every day, overseas criminal networks target Americans, weakening our 

economic prosperity and our safety. Today's hearing provides us an opportunity to evaluate our 

current statutory authorities, law enforcement tools, and resources for protecting the American 

people from the serious and ever-growing threat of international organized crime. 

The organized crime networks we confront today have changed significantly from La Cosa 

Nostra and other criminal networks we confronted in the past. Criminal groups increasingly 

operate internationally, taking advantage of globalization, the internet, and new technologies to 

engage in sophisticated and expansive crimes targeted at victims an ocean away. 

Overseas networks of cybercriminals have hacked into the computer networks of innovative 

American businesses, stealing valuable intellectual property in order to produce cheap 

competitors or counterfeits. Large-scale criminal enterprises are openly engaged in the online 

sale of massive amounts of stolen American movies, music, and software. And an entire 

criminal industry has grown up around stealing and selling credit card numbers, bank account 

passwords, and personal identification information of American consumers. 

Criminal groups involved in human trafficking or smuggling narcotics and weapons are dangers 

to our communities - often engaging in kidnapping, extortion, and related acts of violence along 

the way. Some overseas crime networks are linked to terrorist organizations. 

These foreign criminals' overseas base of operations, flexible network structures, and use of the 

internet and other modem tools create significant challenges for U.S. law enforcement. 

Investigators tracking an international crime group must regularly work in - and with - several 

different countries to build a single case. The laws and practical circumstances in each country 

pose obstacles to uncovering evidence, interviewing witnesses, and locating criminal suspects. 

And the hi-tech tools used by foreign criminals require our law enforcement experts to use 

complex and often costly forensics to identify those responsible for a crime. 

Even once investigators have pieced together a case against a dangerous group and found their 

suspects, additional hurdles may stand in the way of bringing foreign criminals to justice. 

Criminal statutes, for example, may not apply to criminal groups based overseas. And some of 
107 

our most powerful criminal laws for prosecuting organized crime may not capture the types of 

fraud and theft that international criminals engage in today. The RICO statute, just to name one 

example, does not apply to computet crimes and thus does not help combat overseas hacking 

rings. 

Overseas criminal groups demand heightened attention and resources from many elements of our 

govemment. Investigative and law enforcement agencies must work together to detect and 

disrupt overseas criminal plots. They must also collaborate with our economic, diplomatic, and 

intelligence communities to share threat information, cut off criminal networks' access to funds, 

and supplement criminal prosecutions with other approaches to keep the American people safe. 

It is good that the Administration has announced an aggressive strategy to combat international 

organized crime and prepared specific legislative recommendations on which Congress can act. 

Today, we are joined by representatives from the Department of Justice, the Treasury 

Department, and ICE, who are well positioned to discuss the threats we face from foreign 

criminals. I also look forward to hearing more from them about What actions the Administration 

has taken, and what we in Congress can do to provide law enforcement with the tools it needs to 

confront this challenge. 

Protecting American citizens and business from foreign criminals is not a partisan issue. 

Members of Congress in both parties agree that we must strengthen our ability to take down 

these overseas criminals. Our ranking member, Senator Kyl, is unfortunately not able to join us 

today because of his commitments on the debt committee. But I have greatly enjoyed 

collaborating with him this year on legislation concerning cybersecurity and on other hearings, 

and I look forward to working with him, and other members of the committee, on this important 

issue. 

### 
108 

,.,,~ 

/' National Retail Federation ® 

The Voice of Retail Worldwide 

Statement of the 

National Retail Federation 

Submitted to the 

United States Senate Committee on Judiciary 

Subcommittee on Crime and Terrorism 

For its hearing on 

Combating International Organized Crime: 

Evaluating Current Authorities, Tools, and Resources 

Liberty Place 

325 7th Street NW, Suite 1100 

Washington, DC 20004 

800.NREHOW2 (800.673.4692) 

202.783.7971 fax 202.737.2849 

www.nrf.com 

Held on 

November I, 2011 
109 

The National Retail Federation (NRF) respectfully submits this statement for the record for the 

November 1, 2011 hearing entitled "Combating International Organized Crime: Evaluating 

Current Authorities, Tools, and Resources". NRF would like to thank Chairman Whitehouse, 

Ranking Member Kyl and the members of the Subcommittee for holding this important hearing. 

The issue of organized crime, both international and domestic, is a critical issue that has a 

significant impact on the retail industry and US consumers. We fully support efforts by 

Congress to identify requisite authorities, tools and resourccs that will help key federal law 

enforcement agencies, along with their partners in state and local law enforcement, address these 

important issues. 

As the world's largest retail trade association and the voice of retail worldwide, NRF represents 

retailers of all types and sizes, including chain restaurants and industry partners, from the United 

States and more than 45 countries abroad. Retailers operate more than 3.6 million U.S. 

establishments that support one in four u.s. jobs - 42 million working Americans. Contributing 

$2.5 trillion to annual GDP, retail is a daily barometer for the nation's economy. NRF's Retail 

Mcans Jobs campaign emphasizes the economic importance of retail and encourages 

policymakers to support a Jobs, Innovation and Consumer Value Agenda aimed at boosting 

economic growth and job creation. 

Organized Retail Crime 

Specifically for the retail industry, when it comes to organized crime, the major issue we face is 

organized retail crime (ORC). According to the FBI and retail loss prevention experts, the retail 

industry loses between $15 and $30 billion in ORC-related activities each year. In addition, 94 

percent of retailers reported that they were victims of ORC in the past year, according to the 

2011 NRF Organized Retail Crime I survey released earlier this year. This was a 5.5% increase 

over last year and the largest percentage in the survey's history. 

In addition to the increase in the number of retailers who have been victimized, the level of 

organized retail crime activity has continued to increase. According to the survey, 84.8% of 

retailers believe organized retail crime activity has increased within the last three years. 

Furthennore, an increasing number of retailers said boosters are becoming more brazen and that, 

on average, more than one in ten organized retail crime apprehensions (13%) lead to some level 

of violence, such as physical assault and/or battery. 

ORC, as defined by industry experts is the "TheftIFraud" activity conducted with the intent to 

convert illegally obtained merchandise, cargo, cash, or cash equivalent into financial gain (no 

personal use), where/when the following elements are present: 

• TheftlFraud is multiples of items; and 

• TheftlFraud is conducted: 

o over multiple occurrences; 

o and/or in multiple stores; 

o and/or in multiple jurisdictions; 

o and/or by two or more persons, or an individual acting in dual roles ("booster" 

and "fence operators", as discussed below). 

1 A copy of the 2011 NRF Organized Retail Crime Survey is attached. 
110 

Groups, gangs and sometimes individuals are engaged in illegally obtaining retail merchandise 

through both theft and fraud in substantial quantities as part of a criminal enterprise. These 

crime rings generally consist of "boosters" individuals who methodically steal merchandise 

from retail stores - and "fence operators" who convcrt the product to cash or drugs as part of the 

criminal enterprise. Sophisticated criminals have even found ways to switch UPC bar codes on 

merchandise so they ring up differently at checkout, commonly called "ticket switching." Others 

use stolen or cloned credit cards to obtain merchandise or produce fictitious receipts to return 

products back to retail stores for store credit, which may be given in the form of gift cards that 

can then be sold online at a discount from the total value of the card (i.e., netting the criminal 

pure profit for what looks like a good deal to the unsuspecting consumer). 

As an example, in February of this year, more than 30 individuals were arrested and indicted in 

the Phoenix area, for their alleged involvement in identity theft and ORC, consisting of theft, 

fraudulent returns to stores and selling fraudulently obtained gift cards through a popular online 

marketplace. The main suspect, also accused of stealing from a local charity, had a network of 

associates that would recruit people to shoplift items from retail stores and then return the items 

for store credit cards. 

In many instances, organized retail crime groups target several retail stores in one day, moving 

from state to state, across jurisdictional lines, stealing and reselling merchandise. These groups 

often steal thousands of dollars worth of merchandise at a time with the intent to resell it for 

profit, buy drugs or fund terrorist/illicit activities. This past May, law enforcement officials in the 

Seattle area dismantled a sophisticated ORC ring stealing razor blades, detergent, toiletries and 

food items worth an estimated $6.1 million dollars. The ring leaders would pay drug addicts to 

steal merchandise from large retail chains, which would later be sold to smaller stores. 

ORC rings typically target everyday consumer products that are in high demand and easy to 

steal, such as infant formula, razor blades, batteries, analgesics, cosmetics and gift cards. More 

expensive products such as DVDs, CDs, video games, designer clothing and electronics are also 

highly prized. Once stolen, the goods are resold at pawn shops, flea markets, swap meets and, 

increasingly through Internet websites both their own and popular online marketplaces and 

auction sites. 

Most concerting to consumers is that this type of criminal activity can put consumers' health and 

safety at risk. For example, consumers are potentially at risk when ORC rings steal consumable 

products, such as over-the-counter medications and infant fonnula. Pilfered products may not be 

kept under ideal or required storage conditions which can threaten the product's integrity. And 

often times these organized thieves will repackage and re-Iabel stolen products to falsely extend 

the product's expiration date or to disguise the fact that the merchandise has been stolen. There 

have been numerous cases involving the theft of infant formula which was found to not be 

properly stored. 

Federal and State Action Against ORe 

One of the biggest obstacles in investigating and apprehending the criminals who steal and resell 

retail products through online marketplaces is the lack of resources available to local, state, and 

federal law enforcement to investigate these crimes. Over the past several years, there have been 

many attempts by Congress to pass legislation aimed at addressing the issue of ORe. 

Legislation has focused on properly defining ORC, creating enhanced penalties for ORC 
111 

criminals, creating a multi-agency federal unit to help state and local law enforcement and 

creating incentives for online marketplaces to ensure they are not knowingly allowing the sale of 

stolen property on their sites. While legislation has yet to pass Congress, we renew our call for 

Congress to pass legislation as soon as possible to help law enforcement fight ORe. 

In the absence oflegislation, key federal agencies have identified ORC as an important issue and 

have focused more of their attention and directed additional resources to addressing it. In 

addition, several states have passed their own ORC legislation aimed to address the issue. 

The Homeland Security Investigations (HSI) Division of Immigration and Customs Enforcement 

(ICE) has established the Seizing Earnings and Assets from Retail Crime Heists Initiative 

(SEARCH Initiative) which actively looks for and investigates leads related·to ORC ri·ngs that 

have an international scope. SEARCH Initiative investigations often target the way ORC rings 

earn, move and store funds. The SEARCH Initiative was started as a pilot program in 2009 and 

became an official program in October 201 O. 

Since its inception the SEARCH Initiative has resulted in the following statistics: 

HSI Cases Initiated 124 

Criminal Arrests 71 

Criminal Indictments - 56 

Convictions 21 

Seizures - 351 

Value of Property Seized - Over $8.2 Million 

These are overwhelming numbers in the short amount of time in which the SEARCH Initiative 

has been in operation. As ORC continues to be a major issue impacting the U.S. economy, the 

agencies need additional tools and resources to battle the problem. On their own, many local law 

enforcement entities have created ORC partnerships with industry and federal agencies to 

combat the growing problem. However, ORC is not limited to a state or local issue. ORC by 

nature is interstate, and from what we have witnessed, can also have an international nexus as 

well. 

The Federal Bureau of Investigation currently runs an Organized Retail Theft program which 

specifically focuses on the most significant retail theft cases involving the interstate 

transportation of stolen property. Under this program, the FBI partners with law enforcement at 

the federal, state, and local levels, sharing intelligence and working together operationally on 

seven major theft task forces located in five cities around the country-Miami, El Paso, 

Memphis, New York, and Chicago. 

While NRF supports these important initiatives, it further demonstrates the need for greater law 

enforcement resources and coordination at all levels of government to address the growing 

problem of ORC and its impact on the retail industry and the U.S. economy. 

Conclusion 

While retailers will continue to invest billions of dollars in trying to prevent organized retail 

crime and apprehend and prosecute the perpetrators, it is clear to law enforcement and the retail 

industry that the problem cannot he solved by fighting these cases one-by-one and only in the 
112 

shopping aisles. Without new Federal laws in place, these crimes may continue to be 

miscategorized and treated as petty theft or a misdemeanor. Today, ORC cases are rarely 

appropriately prosecuted, and when they are, individuals who are convicted usually see limited 

jail time or are placed on probation if they have no prior arrests. We need to change this equation 

and Congress can help law enforcement do so by passing federal ORC legislation. 

As demonstrated by the facts above, ORC is a serious crime and a top priority for large and small 

retailers nationwide. Expenditures against retail theft have become part of construction budgets, 

merchandising budgets and information technology and staffing budgets. This is an enormously 

important and expensive effort for the retail industry. The continuing growth of organized retail 

crime and the damage it causes to communities dictates that something needs to be done to 

control the tlleft and resale market for stolen goods. With the constantly and rapidly escalating 

scale at which any criminal is now able to operate, it is clear that there is an immediate need to 

update Federal law to cover these 21 st century organized criminal operations. 

We thank you for your attention to this matter. We stand ready to work with the members of this 

Subcommittee, the Judiciary Committees of the Senate and House, and Congress to address the 

growing ORC problem. If you have any questions or need additional information, please contact 

Jonathan Gold (goldj@nrf.com), Vice President Supply Chain and Customs Policy for NRF. 
113 

Aationa, Retail Federation· 

The Voice of Retail Worldwide 

2011 
114 

.... ~ 

./ National ® 

Retail Federation 

About the Survey 

NRF's Organized Retail Crime survey is distributed each spring to senior loss prevention executives nationwide, 

This year's survey features responses from 129 executives representing departmenViarge box stores, discount, 

drug, grocery, restaurant and specialty retailers, The 2011 Organized Retail Crime Survey is NRF's seventh annual 

survey and was conducted from April 19 - May 10,2011. 

About the National Retail Federation 

As the world's largest retail trade association and the voice of retail worldwide, the National Retail Federation's 

global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants 

and industry partners from the U,S, and more than 45 countries abroad, In the U.s" NRF represents the breadth 

and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers 

and generated 2010 sales of $2,4 trillion, www.nrf.com 

NRF Contacts 

Survey Information: 

Angelica Rodriguez 

Sr. Director, Loss Prevention 

202-626-8142 

rodrigueza@nrf,com 

Media Inquiries: 

Kathy Grannis 

Director, Media Relations 

202-626-8189 

grannisk@nrf.com 

NRF 2011 Organized Retail Crime Survey 
115 

Table of Contents 

Executive Summary .............................. " .................................... . .. ............... .4 

Introduction ........................................................................................................... 6 

Increasing Levels of Organized Retail Crime ................................................................ 7 

Gateway Crimes .................................................................................................... 8 

Cargo Theft ........................................................................................................... 9 

Top 10 Cities ....................................................................................................... 10 

Legislative Initiatives ............................................................................................ 11 

Recent Cases ...................................................................................................... 12 

StrategiC Partnerships ........................................................................................... 14 

Additional Survey Findings ..................................................................................... 16 

Conclusion....................... .......................... ... . ................................................... 18 

Addendum A - Highly Targeted Items ....................................................................... 19 

Addendum B - Recent Case Studies ........................................................................ 20 

Addendum C - How Organized Retail Crime Works ..................................................... 22 

www.nrf.com/organizedretailcrime 3 
116 

EXECUTIVE SUMMARY 

The National Retail Federation's Organized Retail Crime survey, now in its seventh year, is conducted every spring 

to gauge the impact and severity of organized retail crime. This year's survey collects information from a variety of 

retailers, ranging from restaurants to department stores to specialty retailers and grocery stores. Insights of senior 

retail loss prevention executives from 129 retail companies are included in this report. 

Organized Retail Crime Grows, Criminals Becoming More Violent 

This year's survey found that organized retail crime affects almost every single retailer, with 95 percent reporting 

they have been a victim of organized retail crime in the past 12 months, up six percent from last year. Although 

retailers continue to build their defenses against this growing problem, criminals are finding myriad ways to work 

around the system. Retailers are also reporting that the criminals they apprehend are increasingly resorting to 

violence, putting the safety of both associates and customers at risk. 

Cargo Theft Poses Major Problem for Retailers 

The scope of most criminal enterprises extends far beyond store limits. For the first time in the survey's history, 

NRF polled retailers about this threat and found that nearly half of all respondents said they have been a victim of 

cargo theft within the past year. The survey found most cargo theft occurs en route from the distribution center to 

the store, but other pOints within the supply chain are just as vulnerable. This not only affects a retailer's bottom 

line, it also affects what consumers end up seeing on the shelves at the store and the amount of inventory 

available. 

Top Cities Impacted by Organized Retail Crime 

Crime rings throughout the country often take advantage of big cities and large highways to move their stolen 

merchandise and hit multiple targets. When asked where in the United States retailers have the most problems with 

criminal gangs and organized retail crime, cities including Los Angeles, Miami, New York and Dallas were listed. 

Making the list for the first time, Las Vegas and Phoenix are now among the top 10 metropolitan areas retailers say 

are affected, indicating criminal enterprises continue to travel the country. Many times, retailers and law 

enforcement officials find it difficult to track these crime gangs because they cross state lines in a matter of hours. 

New technologies, however, are beginning to playa vital role in tracking thefts and criminal behavior even through 

various states and at different retail companies. 

Awareness and Allocation of Resources 

As the economy forces retail executives to pay close attention to every line item in their budgets, loss prevention 

executives say senior leadership is more likely to understand how organized retail crime impacts the company's 

bottom line. This year's survey found nearly six in 10 senior loss prevention executives say their senior 

4 NRF 2011 Organized Retail Crime Survey 
117 

management understands the severity of the problem, a big step up from the 39 percent reported in 2005. As a 

result, many companies are allocating additional resources - including more personnel and greater investment in 

technology - to combat the problem. 

Retailers Identifying More Fence Locations 

Organized crime gangs who steal consumer and other valuable goods such as over-the-counter medicines, baby 

formula, diabetic testing strips and designer jeans, often use the fa9(lde of a local pawn shop, flea market or 

warehouse to hide their stolen merchandise. These criminals also pose as legitimate sellers on online auction sites, 

selling their stolen goods to innocent and unknowing consumers. The report found more than seven in 10 retailers 

identified or recovered this stolen merchandise from both physical and online fence locations. Industry partnerships 

with law enforcement and increased resources in personnel may have contributed to the increase in identifying 

these stolen goods. The increase in the number of retailers who have been victimized may have played a role as 

well. 

Legislative Efforts 

Retailers have spent years lobbying Congress about the need for specific organized retail crime legislation. Specific 

lobbying interests include stiffer penalties for criminals involved with organized retail crimes, expanding law 

enforcement's ability to charge and prosecute offenders and decreasing the felony dollar amount threshold at which 

criminals are charged. Though retailers recently celebrated the passing of HR. 5932, the Organized Retail Theft 

Investigation and Prosecution Act of 2010 in the House of Representatives, which aims to establish the Organized 

Retail Theft Investigation and Prosecution Unit with the Department of Justice, budget crises and several other 

pressing issues prevented this bill from being presented to the Senate. Several states have engaged the issue 

through state legislation and many have already seen success. The report outlines which states have already 

passed bills and those that are currently working on bills. 

Conclusion 

Through various platforms, retailers are able to communicate and network with industry peers about the challenges 

organized retail crime presents for their business and how to combat the multi-billion dollar problem. These 

platfonms include national committees, local intelligence sharing groups, partnerships with local, state, and federal 

law enforcement, and relationships with lawmakers. Together, retailers and Jaw enforcement officials are making 

great strides in uncovering the criminal enterprises that exist throughout the country. These collaborations have 

resulted in many successful federal indictments and the breakup of large crime rings, which operated for years 

behind physical and online fence operations. 

From government affairs and strategic partnerships to grassroots initiatives, retailers have been very resourceful in 

finding ways to confront the issue. Efforts to pass federal legislation persist and work continues behind the scenes 

as executives from different companies come together to shed light on this growing problem. 

www.nrf.com/organizedretailcrime 5 
118 

2011 Organized Retail Crime Survey 

Purpose 

The purpose of the National Retail Federation's annual organized retail crime survey is to understand the impact of 

organized retail crime on retailers across the country. By measuring trends and operational methods of criminal 

enterprises making tens of billions of dollars in illegal profits every year, retailers, law enforcement and legislators 

will be in a better position to respond to this industry-wide issue which has Significant repercussions on consumers, 

brands and local economies. 

Introduction: Organized Retail Crime 

Organized retail crime is defined as the theft/fraud activity conducted with the intent to convert illegally obtained 

merchandise, cargo, cash, or cash equivalent into financial gain (no personal use), where/when the following 

elements are present: 

• Theft/Fraud is multiples of items 

• Theft/Fraud is conducted: 

- over multiple occurrences 

- and/or in multiple stores 

and/or in multiple jurisdictions 

- by two or more persons, or an individual acting in dual roles (booster & fence) 

Groups, gangs and sometimes individuals are engaged in illegally obtaining retail merchandise through both theft 

and fraud in substantial quantities as part of a criminal enterprise. These crime rings generally consist of "boosters' 

- who methodically steal merchandise from retail stores or trailers (cargo theft) - and fence operators who convert 

the product to cash or drugs as part of the criminal enterprise. Sophisticated criminals have even found ways to 

switch UPC bar codes on merchandise so they ring up differently at checkout, commonly called "ticket switching." 

Others use stolen or cloned credit cards to obtain merchandise, tamper with retail equipment such as pin-pads or 

produce fictitious receipts to return products back to retail stores. 

Organized retail crime ring members will have designated roles, such as driver, lookout, picker, packer and 

supervisor. They use hand signals, cell phones, GPS devices and comprehensive shopping lists. Tools of the trade 

include foil-lined shopping bags, purses, boxes and signal jammers to defeat inventory control tags. Some will use 

computers to replicate fake receipts for the purpose of making cash returns, while others will use fake credit cards 

or checks to purchase gift cards and other expensive goods. In some cases, employees are recruited to look the 

other way or provide details about camera or security systems. 

6 NRF 2011 Organized Retail Crime Survey 
119 

Precise measurements of the true scope of this problem are difficult to determine given the inherently secretive 

nature of these criminal operators. However, according to Congressional testimony and industry experts, organized 

retail crime losses total an estimated $15-30 billion annually. 

In many instances, organized retail crime groups target several retailers in one day moving from state to state 

stealing and resel/ing merchandise. These groups often steal thousands of dollars worth of merchandise at a time 

with the intent to resell it for profit. Many times, unsuspecting consumers purchase these items from pawn shops, 

swap meets, flea markets and street vendors. In recent years, crime rings have also swanned the internet with 

intentions to unload their stolen goods through online marketplaces, classified ads or through their own websites. 

This practice is referred to as e-Fencing. 

The most popular items targeted by these groups are goods in high demand commanding up to a near-retail resale 

price, In general, department and specialty stores groups target items such as deSigner clothing, handbags, lingerie 

and accessories. Grocery and drug stores are targeted for infant fonnula, over-the-counter drugs, razor blades and 

high-end health and beauty aids. At electronics and general merchandise locations, items range from batteries to 

the latest "i" devices, Stores are targeted for gift cards using fraudulent tender or return, 

Increasing partnerships between retailers and law enforcement agencies demonstrate the severity of the issue for 

retailers of all sizes and formats, Organized retail crime gangs can wreak havoc on a company's entire operating 

system as well as potentially causing serious hann to store employees and shoppers should a thief get violent. 

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Organized Retail Crime is Increasing 

According to NRF's seventh annual Organized Retail Crime survey, 94,5 percent of retailers have been a victim of 

organized retail crime in the past 12 months, a six percent increase from last year (89.5%), Additionally, 6 out of 10 

retailers (64,1%) report they've seen an increase in organized retail crime over the same time frame, up slightly 

from last year (58,9%), 

Organized retail crime losses are attributed to several factors including lower staffing levels at stores; the ease of 

selling stolen merchandise online, in pawn shops/flea markets and other fencing operations; and the current 

economic environment, which is ripe with consumers looking for low prices, 

How Retailers Have Been Impacted 

by Organized Retail Crime 

• Victim in the last 12 months Seen increase in activity in last 12 months 

100% 

90% 

80% L'"""'-------_--

70% 

60% 

40%L-------------------------------------------------- 2005 2006 2007 2008 2009 2010 2011 

Source: NRF survey conducted April 19-May 10-, 2011 of loss prevention executives at 129 retaH companies. 

iCharts 

Gateway Crimes 

law enforcement and industry experts believe members of organized retail crime groups are engaged in "gateway" 

crimes, with connections to street gangs, drugs, weapons, immigration issues and even terrorist financing, On 

average, retailers believe that 41 percent of organized retail criminals are involved in gateway crimes, including 

drugs, weapons or gangs, 

8 NRF 2011 Organized Retail Crime Survey 
121 

As an example, it is not uncommon to see low-level drug users stealing specific merchandise at the direction of a 

group leader. The new merchandise they steal or fraudulently obtain is then traded for cash to buy drugs or 

exchanged for drugs, In some cases the proceeds of this black market activity are used to further a larger criminal 

enterprise engaged in stolen automobiles, money laundering, or immigration violations. 

Survey Evaluates Impact of Cargo Theft for First Time 

For the first time in this year's survey, the impact of cargo theft was evaluated, According to the survey, almost half 

(49.6%) of retailers were victims of cargo theft within the past year. Most of these thefts occurred en route from the 

distribution center to the store (57.4%), though retailers often experienced cargo theft from the manufacturer to the 

distribution center (39.7%), from one store to another (10.3%), at the distribution center (22.1 %) and when the items 

arrived at a store (17.6%), Figure 2 shows the various location points where cargo theft is a problem for retailers. 

Where Retailers Say Cargo Theft has 

Occurred in the Past Year 

altha store 

at the dlslrlbution center 

ell route from one store 

to another store 

en roule from distribution 

center to SIDro 

ell route from manuf,.clurer 

to distribution canter 

57.4% 

0% 10% 20% 30% 40% 50% 60% 70% 

Source: NRF survey conducted- AprH 1:9-May 1{}, 2011 of loss prev~ntion executiv~ at 129 retail companies. 

iChms 

www.nrf.com/organizedretailcrime 9 
122 

MT 

wv 

Top 10 Cities for Organized Retail Crime 

Last year survey respondents reported the top cities organized retail crime gangs targeted. This year. survey 

responses were very similar. The top cities in alphabetical order include: 

• Atlanta. GA • Los Angeles, CA 

• Chicago. IL • Miami/Ft. Lauderdale, FL 

• Dallas. TX • New York, NY INorthern NJ 

• Houston, TX • Philadelphia, PA 

• Las Vegas, NV • Phoenix. AI. 

Las Vegas and Phoenix are two new additions to the list. replacing San Francisco and the Baltimore-DC-Northem 

Virginia corridor. which both continue to be areas with high organized retail crime activity. 

10 NRF 2011 Organized Retail Crime Survey 
123 

Legislative Initiatives to Counter Organized Retail Crime 

Throughout the country, retailers are working on several fronts to tackle the giant problem of organized retail crime. 

From government affairs and strategic partnerships to grassroots initiatives, retailers have been very resourceful in 

finding ways to confront the issue. 

NRF has been educating state retail associations on organized retail crime since Spring 2005. Utilizing a model 

legislation package NRF published in 2006, several states have engaged the issue through state legislation. 

Organized retail crime legislation in some states has been successful while other legislation is facing hurdles. For 

example, though Los Angeles and the Bay Area in Northern California are consistently rated as one of the top 

organized retail crime activity areas in the country, there have 

been setbacks on the progress of legislation due to the 

state's fiscal crisis with the felony threshold rising from $400 

to $950 earlier this year. This year Texas and Illinois were 

both successful in passing legislation, while New York, New 

Jersey and Massachusetts are all working on bills. 

In Texas, the state legislature recently passed House Bill 

2482, which removes the minimum threshold value for a 

charge of organized retail theft of $1 ,500. Punishment would 

"We must force ourselves to look beyond the 

surface of shoplifting and see organized retail 

crime for what it really is - a large, low risk, high 

profit criminal operation frequently run by very 

astute criminals who are taking advantage of our 

leniency, complacency, and lack 

of cooperative effort." 

Shenfi Grady Judd. Polk County Florida during 

Congressional testimony. September 22, 2008 

be increased to the next higher category of offense for persons that organize, supervise, 

finance, or manage one or more other persons engaged in the activity; or if it is shown at trial the defendant caused 

a fire exit alarm to sound or become activated, deactivated or prevented a fire exit alarm from sounding; or used a 

shielding or deactivation instrument to prevent or attempt to prevent detection by a retail theft detector. The bill is 

headed to the Governor's desk for signature and will take effect in early fall, which is when offenses will be 

categorized as such. 

Illinois House Bill 6460, passed in February, expands law enforcement's ability to charge and prosecute offenders 

of organized retail crime. Under the new law, prosecutors are able to seek forfeiture of assets of those convicted of 

organized retail crime. The forfeiture of assets represents a major legislative step forward in providing financial 

disincentive to organizers and participants of organized retail crime. 

Efforts to pass federal legislation persist. In November 2010, H.R. 5932, the Organized Retail Theft Investigation 

and Prosecution (ORTIP) Act of 2010, passed in the House of Representatives. However, due to the budget crisis 

and several other pressing issues, H.R. 5932 was not presented to the Senate. This bill would have protected both 

retailers and consumers against the massive economic costs and very real public health and safety risks posed by 

www.nrf.com/organizedretailcrime 11 
124 

organized retail crime. Establishing a team of law enforcement professionals dedicated to fighting these crimes and 

working in close consultation with retailers shows the importance of this issue to industry, consumers and law 

enforcement, and serves as an important deterrent to perpetrators. The new Congressional session started in 

January 2011 and NRF is working with members of Congress to explore similar legislation this year. 

Recent Organized Retail Crime Cases 

Retailers and law enforcament partner together investigating many organized retail crime cases each year. The 

methods of operation, retail store locations and products 

change, but the crime is the same - stealing from 

retailers and depriving honest customers of the goods 

they seek. 

Criminals are keen on obtaining the hottest-selling 

merchandise as it is highly resalable. Consumable 

products such as over-the-counter medications, infant 

formula, high-end technology devices and designer denim 

"The weak economy has pushed consumers to look 

for better prices. Organized retail crime groups 

capitalized on that desperation competing with 

legitimate, taxpaying retail companies. Catching these 

bad actors has become a game of cat and mouse for 

investigators. " 

Joe LaRocca, Senior Advisor Asset Protection. 

National Retail Federation 

are some of the top targeted items to be fenced. Trends retailers have identified in top fenced merchandise include 

the desire for all branded merchandise, particularly exclusive licensed goods. The list of frequently targeted items is 

located in Addendum A. 

While a significant number of organized retail crime investigations are opened and closed each year, two notable 

incidents have occurred in the past twelve months. See Addendum B for a larger list of organized retail crime busts. 

In the last three years, very large multi-million dollar organized retail crime rings have been broken apart. Last 

spring, one of the largest rings operating out of the Mid-Atlantic with connections throughout the East Coast was 

brought down. Dubbed 'Operation Pharmgate" for the preponderance of over-the-counter medications involved in 

the case, the investigation uncovered two warehouses, several boosters and local pawnshops all involved in the 

illicit activity. It's this type of activity that has retailers, lawmakers and consumers concerned. Consumers are 

potentially at risk when professional shoplifting rings steal consumable products, such as over-the-counter 

medications and infant formula. Pilfered products may not be kept under ideal or required storage conditions, which 

can threaten the product's integrity. And oftentimes these organized criminals will repackage and re-Iabel stolen 

products to falsely extend the product's expiration date or to disguise the fact that the merchandise has been stolen. 

In September 2010, Albuquerque's 'most prolific burglar" received a 20-year prison sentence for burglarizing nearly 

50 businesses. The suspect, who was part of the "Vatos Locos" group, would smash into local businesses and steal 

12 NRF 2011 Organized Retail Crime Survey 
125 

expensive merchandise such as iPods, sunglasses and cell phones. In addition to the merchandise losses and 

potential safety issues for customers and store employees, some cases involve costly repairs and an unsightly 

storefront to local businesses. 

Incidents Involving Aggressive ThievesNiolence 

Retail criminals know that if they are apprehended they face arrest, prosecution, bail and even jail. Oftentimes, they 

will stop at nothing to steal merchandise and keep from getting caught. Unfortunately, some of these crimes are 

committed through acts of violence and can endanger the lives of others. According to the survey, retailers say that 

13 percent of organized retaifcrime apprehensions result in violence including physical assault or battery. 

Many retailers report an increase in violent behavior among criminals, which puts both employees and shoppers at 

risk. When asked, "Within the past year, what trends in organized retail crime have you noticed," answers included: 

less fear of getting caught 

smash and grab activity significantly increased 

criminals are getting more violent, more bold 

steady increase in activity 

Last holiday season, two separate incidents highlighted the extent of violence and aggression criminals are willing 

to exert to avoid apprehension. 

In November 2010, a loss prevention associate working for Weis Markets in East Lampeter, Pa., was shot in the 

parking lot while attempting to apprehend two retail theft suspects. One of the suspects was taken into custody and 

the other was recently arrested in New York using a stolen credit card. The loss prevention associate was working a 

shift Sunday afternoon when he spotted two apparent shoplifters and followed them to the parking lot. One of the 

suspects pulled a handgun, pistol-whipped him on the head several times and then shot him. 

On the same November weekend, during a police investigation into three men suspected of organized retail crime 

in Orlando, a suspect used a stolen van to ram an unmarked police car in the parking lot of a Target store. With 

dozens of shoppers in the area and few options, two officers were forced to open fire, critically injuring one suspect. 

The two other suspects were booked into Orange County jail on charges induding grand theft and fraudulent use of 

personal identification information. While violent incidents do not occur during all investigations, the propensity to 

violence is increasing and is something retailers are monitoring. 

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126 

Strategic Partnerships to Tackle Organized Retail Crime 

There are several partnerships retailers have established to tackle organized retail crime in various methods 

including: 

national committees 

local intelligence sharing groups 

partnerships with local, state, and federal law enforcement 

relationships with lawmakers 

public media platforms 

'The use of the task force 

approach to combating crime, 

coupled with successful 

partnerships within industry, is 

seen by the FBI as one of the most 

effective and efficient tools by 

which to identify, disrupt and 

dismantle any criminal enterprise. 

That strategy is working. 

Dave Johnson, Section Chief, 

Criminal Investigation 

Division, FBI 

Committee Involvement 

NRF's Joint Organized Retail Crime Task Force (JORCTF) and Investigator's 

Network are two committees dedicated to educating, training and working on 

organized retail crime. Comprised of the nation's top organized retail crime 

investigators, the JORCTF educates the industry and law enforcement on 

patterns and trends. The Investigator's Network is a committee of over 1600 

retail investigators. Meetings held throughout the country in various regions 

and allow loss prevention and law enforcement personnel to meet regionally, 

track local offenders and work collaboratively on major organized retail crime 

issues. 

Local Law Enforcement Relationships 

As organized retail crime has received significant media attention over the past few years, several jurisdictions 

throughout the country have put in place plans to address the issue. The City of Albuquerque laid out a community 

strategic plan in 2008 to get the entire community engaged and involved to make their city a safer place. In 2009, 

the Los Angeles Area Organized Retail Crime Association (LAAORCA) recently conducted their annual training 

seminar with over 800 attendees from retail, law enforcement and financial institutions. Results in both communities 

have been astounding as criminals have begun looking for other locales in which to conduct their illicit business. 

Several communities throughout the country were quick to pick up the format and replicate the regional law 

enforcement-retail community plan in their area. Local organized retail crime associations have been created and 

rolled out in metropolitan areas like San Diego, Chicago and Montgomery County (MD). 

Federal Law Enforcement Partnerships 

Higher volume dollar loss cases, with cross-state border activity or having an international nexus are investigated 

alongside federal law enforcement partners at the U.S. Immigration and Customs Enforcement-Homeland Security 

Investigations (ICE-HSI), United States Postal Inspection Service (USPIS), United States Secret Service (USSS) 

and Federal Bureau of Investigation (FBI). 

14 NRF 2011 Organized Retail Crime Survey 
127 

In July 2009, ICE-HSllaunched a Pilot program in Houston, Los Angeles, Miami and New York focused on building 

partnerships with the retail industry and developing a series of tools to assist law enforcement in threat 

assessments, case tracking and most significantly, an in-depth analysis of how organized crime rings are exploiting 

systemic vulnerabilities in the banking system to launder their profits. 

Due to the success of the Pilot, in February the program was expanded into a national initiative, which will be 

known as the SEARCH initiative (Seizing Eamings and Assets from Retail Crime Heists). As a result of this 

partnership, ICE-HSI reported that as of May 2011, more than 93 criminal HSI cases have been initiated. These 

cases have resulted in 41 criminal arrests, 29 indictments, 15 convictions, 251 seizures, the execution of 22 search 

warrants, and 15 administrative arrests. These cases have also led to the seizure of nearty $4.9 million in cash, 

property, and monetary instruments. 

According to ICE-HSI officials, the challenge of combating these 

networks is best addressed through federal anti-money laundering 

statutes that can carry severe penalties and through partnerships 

between the retail industry and law enforcement at all levels. By 

linking these types of crimes together, federal investigations have 

proven the level and sophistication of criminal enterprises often 

involved in organized retail crime activity. 

"This type of organized, criminal activity is 

commonly looked at as a local problem, 

but I can assure you that is not always the 

case." 

James Dmkms. Executive Associate 

Director. ICE-HSI 

NRF has maintained a long-standing partnership with the Federal Bureau of Investigation (FBI). Since 2005, NRF 

and the FBI have worked together on many fronts, from legislative and networking to training and data share 

initiatives. The partnership has provided education for thousands of retailers and law enforcement, and helped pave 

the path with a unique partnership that was established in spring 2009. 

The Federal Bureau of Investigation has stated organized retail crime groups can best be dismantled through a 

coordinated and cooperative effort between law enforcement and the retail industry. In December 2003 the FBI 

established an organized retail theft initiative to identify and disrupt multijurisdictional groups using federal statutes 

such as conspiracy, interstate transportation of stolen property, and money laundering. 

Additionally, Congress passed legislation signed by the President in January of 2006 that required the attorney 

general and the FBI, in consultation with the retail community, to build a system for information sharing, to include 

intelligence as well as lessons learned and best practices regarding organized retail theft. 

www.nrf.com/organizedretailcrime 15 
128 

Industry Partnerships 

In early 2009, NRF announced a partnership with the world's largest online marketplace, eBay, to tackle organized 

retail crime. With support from the FBI and retailers from around the country, the Partnering with Retailers 

Offensively Against Crime and Theft (PROACT) program was launched. The program is aimed at identifying and 

stopping criminals who resell stolen goods online, and results have been encouraging. 

Another important component of the partnership includes working together on legislation to enhance federal law 

enforcement resources to combat organized retail crime and punish major offenders through enhanced criminal 

penalties. The working group will also identify ways to leverage new technology, including data sharing initiatives, 

which offensively partners with retailers against crime and theft. 

Due to the landlord-tenant relationship, retailers are working closely with mall property owners. In 2007 the NRF in 

partnership with the International Council of Shopping Centers (ICSC) launched a organized retail crime training 

video for mall security officers. By working together, criminal groups may be spotted in parking lots or mall 

entrances before they even enter the store and steal a single piece of merchandise. Through this collaboration, mall 

blitz operations have uncovered dozens of retail crime cases over the past year. This year the relationship is 

expanded to include jOint training sessions during the NRF's Loss Prevention Conference in June 2011. 

Additional Organized Retail Crime Survey Findings 

Overall Organized Retail Crime Levels in the U.S. 

NRF asked retailers what they thought about the pattern of criminal activity in general over the last three years. 

Eight out of ten retailers (84.8%) believe organized retail crime activity has increased in the last three years. 

Allocation of Resources 

While the economy is beginning to recover, retailers are still operating on lean budgets and cautiously adding back 

staff and more resources to tackle the problem. Nearly half of retailers (46.5%) polled report they are allocating 

additional resources toward fighting organized retail crime, a modest decrease from last year (48.4%). Some 

retailers surveyed spend upwards of $1 million on personnel every year to address the issue, while others are 

choosing to invest in technologies that have helped curb the problem. 

Organized Retail Crime Threat Level 

When asked how organized retail crime ranks as a threatto their company, over one-quarter (26.7%) rated the 

problem as a "severe" or "significant' threat to their company. On average, retailers rated organized retail crime as 

2.87, which is slightly up from last year's 2.67 rating. 

16 NRF 2011 Organized Retail Crime Survey 
129 

Physical and e-Fencing Activity 

Retailers continue to report recoveries of stolen merchandise from physical and e-Fencing locations, and have 

experienced a significant increase in the past twelve months. According to the survey, over three quarters (75.2%) 

of retailers say they have identified stolen merchandise or gift cards at physical fence Iocanons and 70.4 percent 

through e-Fencing activities. This is up from last year, when 62.5 percent of respondents reported recovering 

merchandise from physical locations and 66.1 percent from e-Fencing locations. The increases in both categories 

may correlate with retailers' continued awareness and efforts in working with law enforcement agencies to thwart 

the efforts of professional crime rings. 

Top Management anaLaw Enforcement Understanding of Organized Retail Crime 

Retailers continue to be vigilant and tuned in to the potential threat organized retail crime poses on their business. A 

record 58.3 percent of retailers believe that top management in their company understands the complexity and 

severity of organized retail crime, a sixteen percent increase over last year. Retailers have made a lot of headway 

with top management through education and awareness in the media, but the significant amount of traction 

organized retail crime has received in passing bills at the state level and supporting a bill at the federal level has 

raised the profile of this issue as well. 

Retailers were polled on law enforcement's understanding of the severity of organized retail crime. Respondents 

believe 32.3 percent of law enforcement officers understand the severity of organized retail crime, down from last 

year's 39.5 percent. This survey pOint illustrates opportunities for education and training between retailers and law 

enforcement. 

www.nrf.com/organizedretailcrime 17 
130 

Conclusion 

Retailers' level of awareness regarding the problems that organized retail crime creates for their business has never 

been higher. With reports of violent, brazen and aggressive criminal behavior increasing each year, retailers are on 

full alert these days. 

Although it is encouraging that the awareness of organized retail crime is rising among senior retail executives and 

legislators, retailers nationwide continue to suffer billions of dollars of losses each year due to this problem. From 

loss of sales, consistently out-of-stock merchandise to aggressive offenders, organized retail crime gangs wreak 

havoc on retailers - whether it's diluting the brand or to the sheer magnitude of the dollar loss. 

Organized retail crime is a serious issue for large and small retailers nationwide. Locking everything behind glass 

may reduce sales, dramatically impacting the revenue for businesses and tax revenues for states. Expenditures 

against retail theft have become part of construction budgets, merchandising budgets and information technology 

and staffing budgets. This is an enormously important and expensive effort for the retail industry. 

The monetary losses retailers suffer each year to organized retail crime could easily go to new inventory, more 

employees, remodeled store fronts, sales and promotions for their shoppers, new store locations and most 

importantly, lower prices for consumers. Instead, some retailers are forced to resort to increasing prices on their 

merchandise to make up for what they lose to thoughtless, selfish and unethical criminals. 

Since 2005, NRF and its various committees have been on the forefront of educating retailers, law enforcement, 

legislators, the business community and consumers on the vast impact of organized retail crime. As evidenced by 

the top 10 metropolitan areas most affected, there is still work to be done. Only four of the top 10 metropolitan 

areas are located in states with active organized retail crime related legislation. While state legislators nationwide 

are working to close this gap, this remains a challenge for retailers and law enforcement professionals. 

As businesses across the country continue to grapple with a slowly recovering economy and law enforcement 

resources are challenged by economic cutbacks, retailers are working harder to combat the growing problem of 

organized retail crime. The good news is that efforts to increase the industry's awareness, law enforcament 

involvement and strategic partnerships have made a positive difference on the level of activity that retailers are 

experiencing. 

Moving forward, a continued emphasis on training and awareness programs will help retail employees identify and 

understand the economic effect of organized retail crime to their company, which may assist with the slightly 

declining trend. Additionally, by actively participating in public-private sector partnerships, retailers will help facilitate 

information sharing with law enforcement on large, multi-jurisdictional crimes plaguing the industry. 

18 NRF 2011 Organized Retail Crime Survey 
131 

Addendum A-Highly Targeted Items 

Abreva Golf Balls 

Advil Handbags 

Aleve High-end clocks 

Alii weight loss pills High-end liquor 

Art Supplies HP Ink Jet Cartridges 

Aveeno Lotion Husqvama Chainsaws 

Benadryl Immodium Products 

Blu-ray movies and player Kitchen Aid Mixers 

Braun electric razors Laptops 

Braun Toothbrushes LCD Monitors & Televisions 

Braun Replacement Heads Levis 

Bumble and Bumble Hair Products Lincoln Pro-Mig 175 Electric Welder 

Candles Lotrimin 

Cell Phones MAC Products (notebooks, iPads, iPods) 

Chewing Gum & Mints - Regular or Sugar Free Matrix 

Cigarettes Nicorette 

Claritin NorthFace jackets 

Computer Accessories OilofOlay 

Cover Girl Cosmetics Oral B Replacement Heads 

Crest Whitestrips PepcidAC 

Denim Jeans Play Station 3 Consoles 

Deodorant Prilosec 

DeWalt 18v Batteries Primatene 

DeWalt 18v 6-tool Combo Kit Pureology 

Diabetic testing strips Red Bull energy drinks 

Dietary Weight Gain Products (muscle building) RoC 

Dietary Weight Loss Products Rogaine 

Digital Cameras Similac 

Digital Recorders Schick Quattro 

Duracell AA & AM batteries Schick refill cartridges (all) 

DYSON Vacuums Sonicare replacement heads 

E.P.T. Pregnancy Tests Sudafed 

Energy Drinks Tylenol Extra Strength 

Enfamil Victoria Secret "Pink" Lingerie 

Gillette MACH3 Power Refill Razor Cartridges Visine 

Gillette MACH3 Razors X-box 360 Console 

Gillette Sensor Refill Cartridges X-box 360 Games (New Titles) 

Gillette Venus Razors Zantac 

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132 

Addendum B-Recent Organized Retail Crime Cases 

Large scale-fencing location operating in the Los Angeles area. National department store chain partnered with 

law enforcement on a case of vast quantity of levis 

jeans being stolen. 

Los Angeles Police Department-FBI Interstate 

Theft Taskforce (ITTF) A separate case being run by the chain's Midwest team 

identified a booster crew shipping stolen merchandise to 

Dates of Case: Los Angeles via a major nationwide trucking company. 

May 2009- May 2010 Several thousand pounds of levis had been shipped 

West and the warehouse containing all the jeans had 

Total $ Amt of Case: merchandise valued over $30 million worth of Levi's. 

$30 million total 

At the end of the investigation $2.5 million worth of 

$ Amt Seized at Time of Arrest: levi's were seized from this operation. 

$2.5 Million Seized This case speaks to the importance of Retail and law 

Enforcement partnerships. The ITTF has played a major 

role in the success of numerous investigations and continue to provide retailers and the community an invaluable service. 

Dubbed "Operation Pharmgate" because the preponderance of the stolen over-the-counter medications and 

beauty care merchandise. 

Baltimore County (MOl Police Boosters were stealing health and beauty care merchanDepartment and United States Postal Inspector dise from retailers throughout the entire mid-Atlantic 

region. Boosters would sell to pawn shops at 20 - 25% 

Dates of Case: of its retail value and pawn shops would turn around and 

June 2009 - March 2010 sell it only for at prices that were 30 - 40% LESS than 

the relail value. 

$ Total $ Amt of Case: 

$30-45 million total Two warehousing operations were uncovered as merchandise was being transported throughout the mid-

$ Amt Seized at Time of Arrest: Atlantic/East Coast. Based on transaction history and 

$3-5 million seized evidence, investigation was valued at $30-45 million. 

Law enforcement seized $3-5 million in product, with a 

majority needing to be destroyed as it was ingestible 

product (e.g. analgesics, etc) 

20 NRF 2011 Organized Retail Crime Survey 
133 

Addendum B-Recent Organized Retail Crime Cases (cont'd) 

Starting in 2007, one serious offender began systematically stealing scrapbooking merchandise from a national 

chain craft store then reselling it on eBay at heavily reAppleton Police Department (WI) duced prices, sometimes 85% below retail value. 

Champaign Police Department (IN) The investigation revealed that merchandise had been 

Franklin County Sheriffs' Department (OH) stolen from at least 26 stores in 7 states and the operaInternal Revenue Service tion had grown from one booster to several. Multiple 

United States Postal Inspection Service undercover purchases uncovered the main offender and 

confidential informants tipped off investigators. The 

Dates of Case: fence operation was moving away from selling on eBay 

February 2007 - March 2011 (a visible source for doing business) to a more private 

manner of operating by solely reaching out to customers 

$ Ami of Case: through direct marketing. The second main offender 

$6.0 million turned on the first and the case was brought to conclusion. Several agencies became involved including 

United States Postal Inspection Service, Internal Revenue Service and many local law enforcement agencies. 

Polk County Sheriff's Office Polk County Sheriffs Office brought down a massive 

and Florida Department of Law Enforcement organized retail crime ring, which included a warehouse 

filled with stolen merchandise, booster crews that 

Dates of Case: worked throughout the state of Florida and had stolen an 

2003 -2008 estimated $60-100 million from retailers over a five-year 

period. The stolen merchandise was sold online on eBay 

$ Ami of Case: and other online marketplaces. 

$60-100 million 

www.nrf.com/organizedretailcrime 21 
134 

Addendum C-How Organized Retail Crime Works 

Professional Shoplifters 

"Boosters" 

Steal desirable product 

with the intent to resell 

I 

~ .. ... Fence Fraudulent Refunds eFencing 

Pawn Shops, Flea Markets, Return merchandise to Sell online through auction 

Street corners, etc. ++ retail stores ~ sites and other web pages 

30% of retail value 100% + tax of retail value 70% of retail value 

22 NRF 2011 Organized Retail Crime Survey 
135 
136 

From: Newell, William 0 

Sent: To: 

SUbject: 

Wednesday, JUly 07,20108:46 PM 

Re: Mexico Weapons Trafficking - The Blame Game 

"ends" up " Typing and eating dinner, shame on me. 

Bill Newell 

Special Agen! in Charge 

A TF Phoenix Field Division (J>:Z and NM) 

C"II:6~ 

NOTICE: This electroniC transmission is confidential and intended onlv for Ihe 

have received this transmission in error, please notify the sender by rerum e~mail M,i rl,.<t,mv 

(including all attachments), 

From: Newell, William D. 

To:."~~~~~~~~"1I1I1I1I1I1I1I1I1I1I1I Sent: Wed ]ul 07 23:44:18 2010 

Subject: Rei Mexico Weapons TrafficKing - The Blame Game 

message in its 

As for "large seizures" and "OTO related" what about the recenl 147 guns in Laredo SpecifiCallY intended for the Zelas? I 

could go on and on but once Ollf "Fast and Furious" case breaks it wi!! change thls, and crew know better and we 

(ATF) needs to be careful about feeding Dept of Slale witn opinion Instead of fact. It appears to me that Il'lls cable, 

"aulhored" the Ambassador, was based la'1;lely on opinion and not facL It may be the 68Sy road but unfortunately 

drmd emt 

NOTICE: ThiS electroniC transmission is confidential and Intended only for the person(s} to whom rt 1S addressed If you 

h;,3ve received this transmission in error, please notify the sender by return e-mal! and destroy thiS message 1n its entirety 

(!oclucting aU attachments) 

from: 

To: Newell, William D, 

Sent: Wed Jul 07 20:21:43 2010 

Subject: Fw: Mexico Weapons TraffickIng The Blame Game 

NOTICE: This electronic transmission is confidential and intended only for the person(sj to whom il is addressed If you 

have received thIS transmissron in error. please notify the sender by return e",rnail and destroy this message in Its entirety 

(Including all attachments), 

'~"",~,~~~.-~---~-~--,~~~----, 

From:_ To:_ 

Sent: Wed Jul 07 20:19:052010 

Subject: FW: Mexico Weapons Trafficking' The Blame Game 
137 

from: Gil, Darren D. TO:_ Sent: Tuesday, July 06, 2.0.10.101I;.5"IIIIAIIM............ . • •••••••••• Cc: 

Subject: FW: Mexico Weapons Trafficking' The Blame Game 

Importance: High 

All, 

This is the cable that went to Main State, Quite extraordinary in !ane~tage of the situation here m Mexico. 

Although f10t sh()Uld noi be distributed outside of our office, here in 

_ leadershIp should 

Pleas!? note the An,hil"ilrin,"' 

commended, 

as 1 sent an eat1fer version up 

fefe'f to VOW hart! 

From: Gil, Darren D (Mexico City) Ii •••••••• 

Sent: Tuesday, July 06, 2010 9:51 AM 

To: Gil, Darren D. 

Subject: FW: Mexico Weapons Trafficking' The Blame Game 

SBU 

This email is UNCLASSIFIED, 

t'rom: 

Senf: Friday, July 02,2010 10:32:43 

To: 

to 
138 

c~: 

Subject: Mexico Weapons Trafikkiug ~ The Blame Game 

UNCLASSIFIED 

Action Office: 

Info Offic,,' 

MRN: 

OateltlTG: 

From: 

Action: 

f.O.: 

TAGS: 

Captions: 

Reference: 

Pass line; 

Subject: 

LEGAT. POL. ORA 

RSO.DAO.ATF.D~.USSS.OOC 

10 MEXICO 365 

Jul 02. 2010 I 021531Z JUL 10 

AMEMBASSY MEXICO 

WASHDe. SECSTATE ROUTINE 

-

PGOV. PINR. MX. PREL 

SENSITIVE. SIPDIS 

WHA 

Mexico Weapons Traf!1cklng ~ The Blama Game 

1. (SaU) Summary •. The Mexican Government (GOM) has consistently focused the blame for weapons 

trafficking into Mexico squarely on the United States. Recent articles in Mexico City daily. EI Universal, 

however, have called into question whether Blithe responsibility rests with the United States. Of 

whether there is also more Mexico can do to combat this problem. It appears that Mexico may be just 

starting to realize that the answer to the arms trafficking problem requires confronting the challenge on 

both sides of the border. Nevertheless, the GOM still has substantial work to do and institutional 

barriers to overcome In order 10 effectively play its role in stopping the violence associated with the illicit 

weapons trade, End Summary. 

Myth: An Iron Highway of Weapons Flows from the U,S. 

2 (SBUl The MeXican Attomey General's office (PGR) is quicil to report that since the start of the 

Calderon administration in December 2006, Mexico security forces have seized 83,566 weapons. Tile 

sheer magnitude of weapons, as well as the general acceptance that most come from U.S sourcas, 
139 

suggests that there is an "Iron Highway' of weapons streaming across the border in identifiable 

patterns that make interdiction easy. Rather, it appears there maybe thousands of small streams. To 

date, despite U.S. Customs and Border Protection's (CBP) use of the latest detection equipment and 

agents trained in a wide range of interdiction techniques, our best efforts have not produced massive 

seizures of weapons on the U.s. side of the border. although some important seizures have been 

effected and are being investigated. Most illicit weapons confiscated in Mexico are from various crime 

scenes. checkpoints, or DTO camps inside of Mexico· not at the borde" CBP reports that since 2009. 

it and Mexican Customs has conducted coordinated operations at border crossings. Mexican Customs, 

however, is in the nascent stages of transitioning from a tariff collection entity to a law enforcement 

agency and lacks full statutory authority to perform at an equivalent level 10 Its CBP counterparts. At 

present, Mexican Customs relies on other Mexican faw enforcement agencies (SSP, PGR or SEDENA) 

to effect detentions and arrests of smugglers. Additionally, the scarcity of interdiction technology at 

many of the Mexican ports of entry rasult In significant inconsistencies along the border. This, as well 

as the dispersed and small nature of the seizures, suggest that interdiction is no! as simple as plugging 

the suspected holes on the U.S. side of the border. But perhaps the biggest gap is a strong 

diSincentive. In the United States the average sentence for arms trafficking is only 12 to 30 months for 

straight weapons trafficking crimes. For U.S. prosecutors, there is a bigger payoff from focusing on 

other crimes. For traffickers and straw purchasers, the combination of cost and risk still is not too high 

to bear. 

3. (SBUl In order to address this issue, the GaM has worked through the Merida Initiative to identify the 

need for Significant lnves\rr.ent in non-intrusive inspection equipment at the border. NAS and CBP are 

working with their Mexican partners and identifying exchanges and training opportunities under the 21" 

century border pillar in order to strengthen interdiction coordination. 

Myth: The OTOs Are Mostly Responsible 

4. (SBU) While DTOs are the largest consumer of illegal fire arms in Mexico, they are not the primary 

trafficking agents of weapons going south from the United States. ATF officials assess that. insteed. 

straw purchasers buy sma" quantities of weapons at pawn shops, gun shows, and fully licensed firearm 

dealers (FFL) in the United States, illegally transport one to five weapons across the border, and sell 

them Independently to the DTOs. They do not work directly for Ihe organized criminal groups. For 

example. ATF officers cite as an emblematic case the 54 firearms recovered at a Mexican Customs 

check point on March 22. 2009. Using e-Trace. ATF traced all firearms recovered to a licensed dealer 

in St Madera, CA. Further investigation by ATF agents identified twelve Mexican citizens. legally 

residing In the United States. who trafficked these weapons and as many as 442 additional firearms to 

Mexico between 2005 and 2009. Separate individuals with links to organiZed crime in Oaxaca State 

had requested the weapons. The case demonstrates general trends in arms trafficking, including; 1) 

the lack of a single large seizure, but rather multiple small shipments over a long period of time; 2) 

weapons were bough! legally in the United States; 3) the purchasers were Mexicans living legalfy in the 

United States; and 4) the individuals who made the purchases were not directly linked to the organized 

criminal group requesting the transfers. 

5. (SBU) The Mexican Attorney General's Office (PGR) agrees that individuals or small groups, not the 

DTOs, are primarily responsible for most trafficking. This represents a shift from its earlier position. In 

April 2008, PGR offiCially stated in their Monthly Arms Trafficking Report that the DTOs had specific 

members in their organization dedicated to procuring and transporting weapons Into Mexico. In the 

same report for April 2009, PGR assessed thai OTOs did not control the arms trafficking networks. but 

relied on semi·autonomous individuals or small, independent organizations to buy weapons and sell 

them to the cartels. This allowed the oros a more flexible distribution network where they were not 

directly involved In the transactions. 

Myth; Mexico Aggressively Investigating Weapons Confiscated 
140 

6> (SBU) According to PGR records, ten of thet5 commercial brands of weapons regularly confiscated in 

Mexico are manufactured and sold by U.S, companies. To date, however. the GOM has done little to 

investigate the origin of these weapons. As a result, the United States has largely been unable to open 

investigations domestically on unreputable dealers Of smuggling organizations on the U.S. side of the 

border. To assist in these efforts, ATF has made several attempts to implement €I-Trace weapons 

trafficking software in Mexico. In September 2009, PGR's Center for Information. Analysis, and 

Planning to Fight Crime (CENAPI) requested ten accounts and ten computers to access to €I-Trace. 

The requesl followed a presentation at the Bilateral Weapons Trafficking Conference in Phoenix. AZ by 

ATF (Reftel) that discussed the benefits of e-Trace as a tool in developing investigations for weapons 

smuggling, In October 2009, ATF provided CENAPI with ten computers and five accounts, 

corresponding to the number of specific individuals identified as E-trace users. 

7. (SBU) To date, PGR has restricted the rollout of additional accounts to other agencies in the GOM 

reducing its effectiveness as an investigative tool. The Mexican Attomey General told the Ambassador 

in a March 2010 meeting that he wants all Mexican federal and state law enforcement agencies to have 

e-Trace access, but the process nevertheless has been mired in an administrative tug-ot-war for control 

and access to the tool. The Mexican Federal Police (SSP) has requested 70 accounts, and three state 

govemments have requested a total of 300 accounts. but PGR has only given ATF permiSSion to train· 

not provide - other institutions on e-Trace. PGRJCENAPI inSists that It must maintain control of the tool 

and that they are capable of tracing all weapons confiscated in Mexico without distributing it more 

broadly. 

8. (SBU) ATF, meanwhile. assesses that CENAPI does not have the personnel, nor the infrastructure to 

accommodate the volume of traces of confiscated weapons in Mexico. The Secretariat of National 

Defense (SEDENA) claims to have seized over 5,000 firearms since January 1,2010, As of April 23, 

2010, CENAPI has traced 513 firearms - only 10%. U.S. law enforcement officials state that in order 

for e-Trace to be effective, weapons data seized at crime scenes must be immediately entered into eTrace so that the U-S. sellers are investigated and held accountable. ATF touts the May 2010 seizure 

of a weapons cache from a Zeta training camp as an example of how the system can be used 

successfully. As ATF was granted immediate access to the firearms, it was able to quickly trace the 

semi-automalic weapons to.a purchase in Las Vegas only 39 days prior to being confiscated in 

Mexico, ATF opened an investigation and is tracking down the smugglers based on the information 

received from the FFL. ATFs ability 10 quickly perform the traces, rather than having to wait to go 

through CENAPI, contributed to its launching an immediate investigation in the case, The same can be 

said for granting vetted state and deployed local forces e-Trace access, which would allow for the kind 

of swill turnaround on traces that would be virtually impossible through a centralized CENAPI system. 

Recent negotiations for a memorandum of understanding between PGR and ATF on e-Trace usage 

may open the door, but ATF remains skeptical that PGR will allow universal access, [Nate: PGR and 

SRE finally completed their review of the MOU on 25 June and we expect for it to be signed shortly, 

End Note] 

Myth: Mexico Methodically Registers and Tracks Weapons 

9. (SBU) While Mexico has a system in place for registering and tracking firearms, no central database 

exists and the GOM lacks an automated ability to track ownership, SEDENA is solely responsible for 

the import and distribution of legal firearms in Mexico. Moreover, U.S. law enforcement officers say 

that an individual can register a legal weapon with SEDENA without having to submit to a background 

investigation or haVing to provide information on how it was purchased. To remedy this, the GOM 

plans to eventually register all weapons in Mexico in Plataforma Mexico, SSP's comprehensive crime 

database. accessible to velled federal and slate law enforcement officers Plataforma Mexico has yet 

to receive data from e, Trace due to institutional rivalries (the Federal POlice controls Plataforma MexiCO 

but does not have e-Trace access) 

Myth: The GOM Justice System is Tough on Violators of Gun Laws. 
141 

Æ 

10. (SBU) Mexican gun ownership laws as written are quite strict compared to U.S. laws. They prohibit 

personal ownership of rifles or shot guns greater than .22 caliber and pistols greater than .38 caliber, 

Additional restrictions apply to automatic weapons, various classes of revolvers, and semi-automatic 

pistols. Furthermore, owning more than two hand-guns and len long guns is prohibited. U.S. law 

enforcement experts indicate thaI the stncter gun control laws should allow for more prosecutions and 

stiffer penalties for criminals involved in weapons trafficking. Little data is available, however, on the 

prosecution and sentencing of individuals involved with Illegally possessing or trafficking a firearm. The 

case of Gregorio Salgado Lopez is a key example of how the Mexican Justice system struggles to 

detain and prosecute egregious cases of firearms possession or trafficking. In March 2009 Salgado 

was arrested at a checkpoint in San Emerterio for possessing 55 disassembled firearms. A TF 

discovered the esse through local press. Through its own Investigation, ATF determinad that Salgado 

was part of larger ring of smugglers, Although the magnitude of weapons alone should have been 

enough to bring him to trial and obtain a conviction, by the time A TF presented the additional 

information to the PGR, Salgado had already been released without a toot 

11, (SBU) Comment Mexico understands that stopping the flow of illegal weapons into the country is 

paramount to achieving long-term success in the counternarcotics fight. Calderon made this a central 

theme of his address to the U,S. Congress. The responsibility does not lie solely on the northern side 

of the border. Just as demand fuels the flow of drugs north, it also drives the flow weapons south. With 

a combined operational effort, shared information. sustained investigations, and more prosecutions with 

serious sentences in the U.S. our relationship will be strengthenad as wa work together to cease the 

flow of weapons south. The first step will be 10 implement e-Trace across the board in Mexico and (0 

train operators in ils use as an investigative tool. This common platform will provide the springboard 

from which further investigative and Judicial collaboration can occur. But if we cannot prosecute straw 

purchasers and traffickers in the Unitad Slates. and put them In jail with serious sentences. then the 

trafficking will continue. There is too much money to be made, and it will no! stop untillhere is a tough 

price to be paid in US jails. End comment 

Signatur,,: 

Cleared 

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