Financial Investigations Strategy
Strategically, DEA looks at the investigations of illegal drug proceeds as an integral component of every drug investigation, since proceeds flow back toward command and control elements of drug trafficking organizations (DTOs). DEA Special Agents are trained and encouraged to use the money, first as a tool to identify and investigate drug sources of supply, and second, as a means of disrupting and dismantling the financial infrastructure of drug trafficking organizations. DEA is an agency with global reach, with 86 offices in 62 countries, which allows us to carry the fight to the doorstep of those DTOs that spread their poison in the United States and drain billions of dollars each year from our economy.
Seizure of drug cash and guns in Guatemala, resulting from a DEA undercover money laundering operation.
There is little doubt that the sole reason people sell drugs is for the money. Money serves as both the motivating force and the lifeblood of DTOs. Therefore, attacking the financial infrastructure of DTOs has to play a key role in any viable drug enforcement strategy. DEA’s objective with financial investigations is to identify and halt the use of drug proceeds that finance the continued operations of DTOs.
Illicit drug proceeds can be categorized based on how they are used by the DTOs. Drug proceeds are used to pay sources of supply, to support the infrastructure of the organization, and to acquire personal assets. The “cash on hand” left over can be considered as either part of the organization’s working capital or personal wealth. To significantly reduce the supply of illegal drugs, DEA must focus its efforts on the drug proceeds used to pay the sources of drug supply. Denying the sources of supply revenue from the distribution of drugs will hamper their capability to acquire or produce additional drugs and support their organizations. The higher in the drug distribution chain we can deny the revenue flow, the greater effect this denial will have on the entire distribution network.
|This $207 million in bulk cash, seized in a suburb of Mexico City in March 2007, from a supplier of precursor chemicals for the manufacture of methamphetamine, resulted from a lead passed from the DEA Mexico City Country Office to its Mexican law enforcement counterparts.|
In this type of money flow investigation, the financial transactions are also overt acts in the drug conspiracy and, oftentimes, provide the best evidence in linking local drug organizations to their sources of drug supply. Since drug money flows toward the “command and control” of the DTO, as opposed to away from “command and control” like drugs, a money flow investigation enables an investigator to identify communication nodes that allow the him/her to way up the distribution chain, which is the primary objective of all drug investigations. To ensure maximum effectiveness, DEA money flow investigations are designed to be compatible with, not competitive with, the long-term asset-tracing type investigations that have traditionally been the norm. In fact, whenever DEA is involved in a long-term, asset-tracing type investigation, there is always an agency such as the Internal Revenue Service (IRS) involved as well.
Since most of the major DTOs are polydrug organizations, i.e. involved in the smuggling and wholesale distribution of marijuana, heroin, cocaine, and/or methamphetamine, it is virtually impossible to differentiate the source of the drug money by the type of drug. Cash is still king in the illegal drug world. DEA targets this cash during the collection, counting, storage, transportation and conversion stages of its drug-related life cycle using the same investigative techniques that are used to investigate drugs. DTOs handle drug cash in the same manner they handle drugs, i.e. as contraband. It is during this stage that drug money is most vulnerable to detection and interdiction, and most difficult to defend as to the source by the DTO owners and/or the money laundering organizations (MLOs) that service them. DEA is the best equipped and trained agency to carry out “contraband” investigations. Accordingly, DEA “financial investigations” in the field and headquarters-driven programs focus on identifying and interdicting those drug proceeds flowing back to the source of drug supply.
DEA estimates that approximately one half of the designated Global Terrorist Organizations derive a major portion of their operational funding from drug trafficking with a substantial portion of this funding coming from drug abusers in the U.S. Since this funding can become a national security threat to U.S. interests both at home, and throughout the world, DEA works very closely with its domestic and foreign law enforcement counterparts to cut off the lifeline that drug money has become to these terrorist organizations.
DEA has identified the following as the major money laundering typologies relating to movement of drug proceeds:
To address these threats, DEA has formulated a strategy that encompasses intelligence-based enforcement, as well as domestic and international collaborative efforts with law enforcement and financial industry counterparts to identify, target, and ultimately prosecute the command and control elements of international sources of drug supply. DEA also targets rogue banks, MSBs and businesses who are complicit in the placement and movement of drug money, through criminal enforcement and asset forfeiture.
The DEA Office of Financial Operations (FO) maintains liaison relationships with the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), a bureau and agency, respectively, of the U.S. Treasury Department. Through its relationship with FinCEN, DEA FO facilitates the access to Bank Secrecy Act (BSA) reporting by financial institutions to uncover the movement of drug proceeds and connect those proceeds to the DTOs and MLOs who own and/or facilitate their movement and concealment. FinCEN, as the U.S. Financial Intelligence Unit (FIU), is a member of the Egmont Group, a global confederation of FIUs. As such, FinCEN facilitates DEA’s access to information from other Egmont Group FIU members.
Through its relationship with OFAC, DEA FO facilitates the flow of drug-related information, which is used by OFAC in its evidentiary investigations to support the designation of Special Designated Nationals (SDN) to its SDN list as either a Tier I Kingpin, or a Tier II Associated Entity. The OFAC partnership and the designations have become an invaluable tool for DEA to attack international sources of drug supply, the MLO’s, and corrupt individuals whom facilitate drug trafficking and money laundering, through the application of regulatory sanctions and freezing orders.
Relationships with the Financial Services Industry
DEA FO and the Financial Investigation Teams (FITs) in each field division maintain close working relationships with both banks and MSBs to foster the flow of financial information for use in drug and drug money laundering investigations. These relationships allow DEA to share information with trusted institutions to document the historical and proactive movement of drug proceeds, as well as proactively target proceeds and individuals. This flow of information also allows these institutions to better hone their anti-money laundering monitoring software to better analyze the enormous amounts of financial transaction data within their databases in order to identify and report suspicious transactions through BSA reporting on the movement of drug proceeds as well as the transactors and beneficial owners of those proceeds.
Relationships with Domestic and Foreign Law Enforcement Counterparts
DEA maintains close working relationships with both its domestic and foreign law enforcement counterparts through which it conducts joint financial investigations, shares intelligence, and provides training to the financial services industry. DEA is able to leverage its foreign law enforcement relationships to facilitate its anti-money laundering investigations when the need and/or opportunity arises to conduct operations outside the U.S.
DEA operates two multi-agency centers, the Special Operations Division (SOD) and the El Paso Intelligence Center (EPIC), through which it shares information, coordinates and deconflicts investigations with its law enforcement counterparts. Each of these centers provides invaluable operational and/or intelligence analytical assistance to financial investigations being conducted by DEA.
DEA National Financial Program Initiatives
To carry out its financial enforcement strategy, DEA, through the Office of Financial Operations (FO), has initiated a number of national programs that target the flow of funds back to international sources of drug supply. These national initiatives support and/or help initiate field operations against major DTOs and MLOs.
DEA has 21 Financial Investigation Teams (FITs). These teams are located in each of its 21 domestic field divisions. FO also maintains a presence at the Special Operations Division through which it coordinates both domestic and international financial investigations as well as supporting SOD interagency drug and narco-terrorist investigations.
The FITs are tasked with carrying out DEA’s national financial initiatives, providing guidance to other DEA personnel in financial investigations, conducting the more sophisticated financial investigations, and serving as DEA’s local point of contact with the financial community. All DEA investigations are mandated to include a financial investigation. The FITs are not expected to conduct all DEA financial investigations. However, they do provide guidance, when needed, to other DEA investigators on their drug and financial investigations.
In addition to the FITs, DEA has a number of Special Agent personnel assigned to liaison positions within the Intelligence Community, Department of Defense and the Executive Office of the President (ONDCP) who enhance our ability to conduct financial investigations.
Illegal drug proceeds and the money laundering schemes that are utilized to conceal these proceeds from law enforcement, know no borders. Therefore, in order to effectively identify and trace these proceeds; and, bring to justice, the individuals who own and facilitate the transfer and concealment of these illicit funds, DEA needs to think and act globally. DEA has established financial vetted units in many countries around the world, which it empowers through specialized training and investigative resources. These relationships have become crucial to DEA’s ability to conduct international financial investigations, and has also enabled its counterparts to better combat drug trafficking and drug-related money laundering and corruption within their respective countries. DEA adheres to a strict policy of obtaining country clearance from the affected U.S. Embassy, as well as notification and authorization from the host country before undertaking any operational activity in a foreign jurisdiction.
A major component of the empowerment of host country counterparts is training. The DEA Office of International Training and the Office of Financial Operations conducts financial investigative training for foreign law enforcement, prosecutors, and regulatory officials. For example, over the past three years, the Office of Financial Operations has conducted training for officials in the countries of Australia, Thailand, China, France, Senegal, Peru, Chile and Argentina.
|Senegalese Gendarme vetted unit (pictured with DEA personnel, US Ambassador to Senegal, James Zumwalt and DOJ OPDAT attorney Michael Lang), who received specialized money laundering and financial investigative training coordinated and delivered by DEA Office of Financial Operations|
Within the United States, regulators and law enforcement have a fairly accurate overview of the financial services industry and the large currency and suspicious transactions that take place within its institutions. Particularly after the additional tools provided by the USA PATRIOT Act were enacted, law enforcement generally has access to the information it needs to identify and thwart significant money laundering efforts within the United States. However, this same transparency is not present in many other countries.
Through the efforts of the Financial Action Task Force (FATF) and its regional bodies, bank secrecy and anonymous accounts are largely a thing of the past. However, there remains a lack of transparency in many countries’ financial systems that can be a facilitator for drug money movement. Usually, this kind of financial opaqueness is caused by either a lack of political will and support, or a lack of resources to fund adequate anti-money laundering (AML) efforts. When these AML weaknesses are coupled with a complicit financial sector, they act as a magnet for DTOs, terrorists and other criminal groups.