American Enterprise Institute

Unraveling the web: Dismantling transnational organized crime networks in the Americas

Opening remarks: Marshall Billingslea, US Treasury Department

Panel discussion I

Participants: Douglas Farah, IBI Consultants Emanuele Ottolenghi, Foundation for Defense of Democracies Celina Realuyo, National Defense University

Moderator: Roger F. Noriega, AEI

Panel discussion II

Participants: William Brownfield, US Department of State (former) Clay R. Fuller, AEI Patrick Hovakimian, Department of Justice Welby Leaman, Walmart

Moderator: James Dunlop, Jones Day

1:00–3:35 p.m. Tuesday, October 30, 2018

Event Page: http://www.aei.org/events/unraveling-the-web-dismantling- transnational-organized-crime-networks-in-the-americas/

Matthew Heiman: Good afternoon. Good afternoon. Good afternoon. My name is Matthew Heiman, and I chair the Federalist Society’s International & National Security Law Practice Group. For those that don’t know what the Federalist Society is, allow me a moment to do a quick PSA, and then we’ll get on with our program.

The Federalist Society is a membership organization comprised primarily of libertarians and conservatives that are interested in the legal order. It is founded on the principles that the state exists to preserve freedom, that the separation of governmental powers is central to our Constitution, and that it’s emphatically the province and duty of the judiciary to say what the law is, not what it should be. The society seeks both to promote an awareness of these principles and to further their application through its activities.

On behalf of the Federalist Society and AEI, it’s my pleasure to welcome you to today’s event, “Unraveling the web: Dismantling transnational organized crime networks in the Americas.” Before introducing today’s keynote speaker, I want to thank AEI for its terrific collaboration in bringing this event together and its kind of hospitality for hosting us all today.

I also want to recognize a few individuals in particular that were critical to this event coming together. The first is Dean Reuter of the Federalist Society, Roger Noriega of AEI, and Jim Dunlop of Jones Day and the Federalist Society. They drove the planning for today’s discussion. I also want to thank our expert panelists for what I know will be a lively and informative conversation and our audience both here and those viewing us via the livestream.

With that, it’s my privilege to introduce today’s keynote speaker, Marshall Billingslea. Mr. Billingslea is the assistant secretary for terrorist financing and financial crimes in the Department of the Treasury. In this role, he works with members of the national security community throughout the US government, foreign governments, and the private sector to identify and address threats posed or advanced by illicit finance. His areas of focus include money laundering, terrorist financing, WMD proliferation, and other criminal and elicit activities domestically and across borders.

This past August, he was nominated to be the next undersecretary of state for civilian security, democracy, and human rights. Prior to this stint in government service, Mr. Billingslea was a managing director with Deloitte Financial Advisory Services, where he ran the Federal Business Intelligence Services group. He specialized in investigating beneficial ownership structures and advising businesses on the legal and regulatory risks associated with third-party transactions, particularly those in overseas markets. In addition to the Treasury, Mr. Billingslea’s government career spans multiple positions within the Departments of Defense and State and the United States Senate. Mr. Billingslea holds a bachelor of arts from Dartmouth College and a master of arts in law and diplomacy from the Fletcher School of Tufts University.

Please join me in welcoming Mr. Billingslea to the podium.

Marshall Billingslea: Thank you. Thanks for that wonderful welcome. And it’s really a pleasure to be here today with members of the Federalist Society, AEI, and a number of friends and colleagues who I’ve had the pleasure of getting to know and work with on a wide range of Western Hemisphere issues, including the topic of transnational organized crime. AEI has done some fairly crucial work on this topic, and my team, in particular, brought to

my attention the report that was published last summer on the Western Hemisphere and on TOC threats.

I think it’s important to recognize that, even as the Treasury Department, along with the rest of our national security infrastructure, is focused on global threats posed by countries such as Iran, North Korea, and Russia, we must — it is essential that we must maintain vigilance and maintain a high level of pressure on the organizations that pose acute dangers to us and to our homeland here via transnational criminal organizations in the Western Hemisphere. It is among the highest priorities of my office to disrupt these networks and to keep the focus on the Western Hemisphere itself.

We have, as noted, been working very closely with international partners, as well as other US government departments and agencies, and I’m gratified that we’ve got broad participation in some of the panels later today along those lines. The president’s Executive Order 13-773 made clear that its issuance was designed to reinvigorate the United States government’s focus and efforts against transnational organized crime. And it called for a “comprehensive and decisive approach to dismantle these organized crime syndicates and restore safety for the American people.” My Treasury has been working independently and as part of an interagency effort as called for in that executive order to implement that vision.

I’d also highlight — and I think most of you are aware — that the attorney general just this past month announced the creation of a task force at the Department of Justice, focused on five priority threat actors. Four of these five, and that’s CJNG — and I will include Los Cuinis, which is their professional anti-money-laundering syndicate that’s associated with CJNG, in that — MS-13, the Gulf Cartel, and the Sinaloa Cartel all operate primarily in the Western Hemisphere. Hence our focus. And the fifth, Lebanese Hezbollah, has got a very robust presence in the tri-border area.

TCOs pose a threat to the integrity of our financial system here and the financial systems of our friends and our allies. In addition to their heinous acts of violence and activities that expose US citizens to the deadly effects of illegal drugs, TCOs launder, and they place those drug proceeds into our American financial system and into the financial systems of our region through the movement of bulk cash, through structuring of deposits, their trade-based and other money-laundering schemes.

Our most recent national money-laundering risk assessment, which was published in 2015 and is in the process of being updated, estimated at that time that around $64 billion was generated annually from the sale of drugs in the United States, with Mexico being the primary supplier and transit zone for certain of those drugs, Colombia being, of course, the leading provider of cocaine. Based on our updating of this risk assessment and our engagement through that process with law enforcement, we believe that figure has increased substantially.

So turning to the specific threats posed by TCOs and criminal actors in the Western Hemisphere, it’s important that we get very specific. Mexico is home to several large TCOs, and we in the Treasury invest significant time in identifying the money-laundering operations of these organizations and working with the Mexican government to disrupt them. And here I’m focusing particularly on the Sinaloa Cartel, Los Zetas, and CJNG.

For over 15 years, Treasury’s Office of Foreign Assets Control has targeted the assets of major Colombian narcotics traffickers and their criminal organizations. And my former office in the Department of Defense, SOLIC, was heavily involved in the disruption of FARC efforts, the disruption of Pablo Escobar before them, and so on. We work very closely together. And we continue to focus on leaders and members of both the Cali and North Valley drug cartels, the FARC, and the AUC, among others. And we operate through an Executive Order 12978, as well as the Foreign Narcotics Kingpin Act — this is the Kingpin Act — which has resulted in the freezing and the disruption in billions of proceeds associated with these organizations.

We also are now beginning to zero in on the emerging threats across the region, such as those posed in Central America by gangs and by money-laundering organizations that have been operating for some time in Honduras and Panama. The adverse effect of the criminal activities of these gangs is most evident in the Northern Triangle countries of El Salvador, Guatemala, and Honduras, where gang activity — you can see the act of depression of foreign investment as a result of the gang activity, and you can see the ensuing migration that results.

In the Northern Triangle, gangs such as MS-13 raise significant sums of money through extortion of small to medium-sized companies, and they operate transportation networks and even continue to operate brazenly from prison when they are imprisoned. Their actions have displaced innocent people from their homes, threatened the lives of entrepreneurs in these countries who have been forced to shut down what otherwise would have been productive businesses, and have limited, therefore, people’s abilities to take advantage of job growth, job creation, and educational opportunities, or even to move around in their own hometowns. Worst of all, the victims are forced to keep paying these gangs on extortion — on a regular extorted basis to avoid becoming targets.

There are also very real consequences for us here in the United States. Gangs have used our financial system, particularly money service businesses in this case, to fund operations in the Northern Triangle, and they extort Americans in our communities here as well.

We also have to be vigilant against the threats posed by terrorists. So I mentioned the Mexican structures we’re dealing with. I mentioned the Colombian organized structures that we’re dealing with, the gangs in Central America. But we have to recognize that Lebanese Hezbollah has a deep and substantial footprint in the Western Hemisphere, and they use the cover of seemingly legitimate businesses in the tri-border area of Argentina, Brazil, and Paraguay to collect donations across Latin America in their attempts to both exploit our financial system and funnel money for terrorist operations in the Middle East and elsewhere.

As many of you know, Treasury also has significantly increased its efforts to target the repressive conduct of one of the largest criminal enterprises in the Western Hemisphere, if not the largest criminal enterprise in the Western Hemisphere, which is the regime of Maduro. The Venezuelan government, the kleptocracy of Venezuela, is the economic strategy of that regime. And Venezuela is a major, major priority for us.

We have not seen the kind of criminal conduct on this scale in the Western Hemisphere prior to Maduro’s ascension to power. Embezzlement, graft, fraud, all designed to maintain the loyalty of regime insiders who support his continued dictatorial rule. The most widely known corruption scheme used by the regime has been the absolute embezzlement of anything not

bolted down associated with PDVSA, the state-owned oil company. But the Venezuelan government and elements within it are also involved heavily in drug trafficking and illegal mining schemes.

And more abhorrent perhaps than any of that, if you can believe it, is that Maduro uses limitations on humanitarian food aid, restrictions on food aid into the country where people are starving, where the average weight loss is more than 25 pounds, where children are dying five and six a day now, as a result of lack of access to medicines, basic, basic medicines, basic things. He restricts that access in order to further loot the so-called CLAP program, which is the food aid box program.

And I want to be very clear with you. The CLAP program is not a humanitarian assistance program. It is a method of social control and repression that Maduro uses not only to control the population but to enrich himself and others.

In Nicaragua, we also are greatly concerned about the human rights abuses being committed there and the brutal violence that was unleashed by the Ortega regime in response to completely legitimate demands for democratic reform. As well as now, by the actions of senior Nicaraguan officials to move and launder corruption proceeds from Nicaragua through offshore locations, including the United States.

To combat these vast and complex networks, it is essential that we have friends and allies in the fight with us. Mexico has been such a great partner. I look forward to continuing the cooperation with the new government once they take office here in just a few weeks. We are strengthening together our anti-money-laundering and CFT — countering the financing of terrorism regimes — across the region, as we continue to strengthen our regime here in the United States. With Mexico, we colead a working group that improves information sharing between our governments and our private sectors — the banks and others — on illicit finance. We also contribute to operational activities by exchanging highly specific lead information with one another on specific targets, entities that we wish the Mexican authorities to investigate and to take action against.

In the case of Colombia, we have an outstanding working relationship with the Finance Ministry of Colombia and with its financial intelligence unit and with other Colombian authorities, who in collaboration with us have seized over $2 billion in assets since 2004 related to joint investigations with OFAC, with our Office of Foreign Asset Control, and the Drug Enforcement Administration. The sheer volume of assets seized in Colombia demonstrates — of course, it’s just a fraction of the total, right — demonstrates the immense wealth that these organizations wield and that we have to continually strengthen our joint efforts against these organizations.

In Central America, we chair a dialogue between the United States and regional authorities, again with the private sector, because the private sector is our first line and our front line of defense in all of these matters. We depend heavily on the banks and other financial institutions to serve as that trip wire to alert the United States and other authorities when suspicious activities are in the offing.

And our work with Central American countries includes recent collaboration to identify vulnerabilities in the Central American financial system and the threats posed by extortionate and narcotics trafficking, particularly associated here with MS-13 and by Barrio 18.

In the tri-border area, in response to the threat posed by that terrorist financing dimension of Hezbollah, we are working with authorities in Argentina, Paraguay, and Brazil, all three now, to address the risks and vulnerabilities associated with Hezbollah operations. And we believe that we are going to now start to make significant strides forward together in a way that perhaps has not been seen in the past working against Hezbollah. And I think we’re already seeing that bear fruit.

Argentine and Paraguayan authorities have recently taken action on their own against a money-laundering network in the area. And in Brazil, in September they arrested an OFAC- designated Hezbollah financier who Paraguay is seeking to prosecute for identity theft charges.

Treasury itself has taken more actions against Hezbollah’s illicit activities around the world this year than at any other time in that organization’s history. And we are fully committed to denying Hezbollah reach or access into the Western Hemisphere, and we intend to degrade that access globally. And I have to really commend the Argentinian authorities and the Paraguayan authorities, and now the Brazilian authorities, for the joint work that they are conducting on this topic.

With Argentina, as I mentioned, we have a recurring bilateral dialogue on illicit finance that identifies and shares information on money laundering, terrorist financing, and other types of typologies. How do they do it? What does it look like? What’s a generic case study that you can use to monitor your financial system for threats? And we’ve also been able to strengthen our cooperation with Argentina to combat Venezuelan corruption networks, as I mentioned.

So to conclude here on Venezuela, I want to focus on one particular network that illustrates the sophistication and reach of these TCO organizations. We have issued advisories recently both in English and Spanish to our financial institutions to assist them in identifying these kinds of typologies. And while we designated more than 100 individuals and entities that are linked to the government of Venezuela’s rampant corruption, their human rights abuses, and their undemocratic behavior, particular focus needs to be given to Diosdado Cabello. Earlier this year, we targeted a network supporting Cabello, including his testaferro, his front man, Rafael Sarria. And in September we went after an additional piece of that network associated with Sarria’s brother, some private jets that we found, and other shell company structures that had been established in the Caribbean and elsewhere.

Cabello maintains significant leadership positions in Venezuela since Chavez elevated him to the position of minister of interior and justice initially. Cabello has abused, at every step of the way, his influential positions in furtherance of his illicit and corrupt activities, and he controls and directs government agencies and military officials in Venezuela for that purpose. He has an entrenched network of supporters. And the way he maintains that is because he simply decides who gets promoted within agencies and ministries such as the Ministry of Defense and the Ministry of Public Works. Cabello, in turn, has used that sphere of influence to personally profit from extortion, from money laundering and embezzlement.

For instance, as of December of 2016, Venezuelan officials associated with Cabello were using state-owned enterprises including Venalum, which is the aluminum structure, and Alunasa, Aluminos Nacionales S.A., to launder money to Costa Rica and Russia. The president of Venalum, as well as another individual who ran the company, were engaged in

drug trafficking and money laundering and used Venalum as a cover for these operations. Under the direction of now US-designated Francisco José Rangel Gómez, in his capacity as the governor of the state of Bolivar, Venalum used boats to move minerals and to launder money through Panama to the coastal Costa Rican branch of Alunasa. And Cabello was directing the Venezuelan military to play several Alunasa employees in Costa Rica to oversee this entire operation. In addition, Cabello was laundering money through Venalum to Russia.

On top of the money laundering and the illegal mineral exports, Cabello is also directly involved in narcotics trafficking. Working with Tareck El Aissami, who we’ve also designated pursuant to the Kingpin Act, Cabello continues to organize drug shipments being moved from Venezuela through jurisdictions such as the Dominican Republic and then onwards to Europe. Cabello also directs Pedro Luis Martin Olivares, who is designated pursuant to the Kingpin Act in May of this year. In late 2016, Cabello and Martin came up with a scheme to move illicit money to Panama, the Dominican Republic, and the Bahamas. And as of March of last year, he was actually just seizing drug loads on his own from small- scale drug traffickers, combining them, bundling them, and exporting them onwards through the Venezuelan government-owned airport — through a Venezuelan government-owned airport. And Cabello, along with President Maduro and others, then divvied up the proceeds from these narcotics shipments.

My point on this is that under the patina of the Maduro regime, this network has wide, wide reach. And to combat it, it is essential that we work with friendly governments, whether we’re talking about Mexico, but I would add Canada — Panama is an outstanding partner — the European Union, the United Kingdom in particular, and other countries across Latin America, to build the legal regimes necessary so that our partner nations can implement their own sanctions regimes — not simply rely upon us for the action, but to take action themselves, to have their own ability to block proceeds and to freeze funds, in particular, so that we can disrupt this massive Venezuelan corruption conglomerate. So our cooperation to tackle TCOs outside of our borders not only is helping halt threats abroad, but it also reduces the threats these organizations pose to our own financial system.

In the forthcoming money-laundering risk assessment that you will see us release, you’re going to find that we pay particular attention to two vulnerabilities we see now most in use in the United States. And that is the misuse of legal entities through the masking of beneficial ownership structure and real estate. With respect to the detection of use of legal entities, that collection of that beneficial ownership information is essential.

And so our customer due diligence rule, which we imposed in May of this year, on May 11, now requires financial institutions to identify and verify the beneficial owners of companies opening new accounts. That, in turn, bolsters the ability of our law enforcement agencies to investigate misuse of legal entities for the purpose of establishing bank accounts and otherwise structuring proceeds to the system.

We also are looking heavily at illicit finance typologies associated with property. And we’ve released advisories on how the real estate sector is, in fact, being abused, not just by organized groups operating out of Venezuela, but actually globally. We see Russian money here. We see other — other funds coming into the real estate sector.

Finally, this year, in our capacity as having the presidency of the Financial Action Task Force, which is the standard setting body for all anti-money-laundering regimes, we are pushing to develop new standards for the supervision and regulation of virtual assets to make financing — the illicit financing and the organized criminal financing using cryptocurrency more difficult and more challenging by elevating global standards against those activities.

Again, I greatly appreciate the opportunity to appear before you today and appreciate the Federalist Society and AEI hosting this event. And I look forward to talking with Roger and ultimately answering any questions you may have for me. Thank you.

Roger F. Noriega: Very well done. Very thorough. I crossed off all my questions, so I’ll just sit here quietly.

You’ve been a very busy man. You’re off a lot of Christmas card lists from the Russians and the — well, the Muellers don’t send Christmas cards, but I’m sure you’re not one of their favorite people. But after your presentation today, Diosdado Cabello — you might want to increase your security detail, but that’s just my friendly advice.

Thank you very much for coming. You talked a lot about Venezuela and what they’re doing internally, which has international implications. But what would be your answer to the question if President Trump were to ask you, “Is Venezuela a national security threat to the United States?”

Marshall Billingslea: Well, my answer would be straightforward. Venezuela poses a clear threat to regional stability and security. On top of the horrific humanitarian crisis that’s unfolding before our very eyes — and we’ve never seen a collapse like this in the history of the Western Hemisphere. And I would submit that we cannot take it as a given.

That cannot be allowed to happen because, in addition to the suffering of the Venezuelan people, we’re seeing the spillover and knock-on effects that are threatening to drag down key allies such as Colombia, Brazil. It’s affecting the Brazilians, it’s affecting Ecuador, and it’s affecting Argentina. So this is a hemispheric issue, and the implosion of the regime there is a direct challenge for us.

Roger F. Noriega: You also mentioned the freezing of assets. Well, by blocking a specially designated national’s access to financial system, that effectively blocks their assets in financial institutions. It’s a global phenomenon. There’s some estimate that these folks have looted $350 billion. That’s a conservative number.

What have you been able to do? What are your expectations in terms of being able to freeze — I’m sorry, to seize these assets, essentially forfeit these assets, and eventually return to them to a democratically elected successor government in Venezuela? And has the international community been working with you on that? What sort of strategies do we have to make here at home and then with our partners to make sure that most of that money makes its way back?

Marshall Billingslea: Yeah, that’s a great question. And we are working very, very closely, in fact, with the very countries that I sort of singled out in my remarks. With the government of Mexico, with Colombia, with Panama, Argentina, Spain, and others on this. Obviously, I want to stay away from any particulars, but you have, I think, seen the fruits of that

collaboration in recent days with a number of arrests and blockages. I was very pleased to see the decision by some of the companies in Mexico to pay into the UN Human Rights Commission for Refugees, to pay funds into that. A program that had been previously associated with the CLAP program, as an example.

The first step is to find the funds. The second step is to put the block on them. You know, ultimately, asset forfeiture, I would defer to my Department of Justice colleagues on those methodologies, particularly for repatriation of funds. But it is important for the Venezuelan people to understand that we are on the hunt for Maduro and Cilia Flores’ money, and we’re not going to stop until we find it.

Roger F. Noriega: Certainly, it’s a pretty big target. Let’s pull out a little bit.

Marshall Billingslea: Let me rephrase that. It’s not their money. Money they stole.

Roger F. Noriega: Absolutely, absolutely. Pull out a little bit to a higher perspective. You’ve been in this job for 16 months, roughly. What gaps do you see in terms of the tools available to the United States government to address this phenomenon? Not only here but around the globe. Do you need additional resources for investigations or legal authorities or Treasury could do a more effective job than it’s already doing?

Marshall Billingslea: That’s a good question. I think there are a couple of things. One of the areas that I’ve been very focused internally within the Department of Treasury is to bring some of the new and emergent technologies that I benefited from when I was at Deloitte, relating to the use of commercially available — publicly available information, advanced data analytic techniques, data mining techniques, different kinds of graph databasing technologies, to really provide a technology refresh to how our people conduct investigations.

Secondly, because we’re all people, we change jobs. We do different things in life. You have to continually refresh your relationship with the private sector. And that is vital. Again, as I mentioned, the private sector is in many respects our first line of defense in all these things.

In terms of other authorities, one of the things I mentioned is the desire to have other countries with similar sanctions, regime, legal authorities so that when we engage in a joint action together, yes, they may go in and conduct arrests or other things, but we need them to have the legal authority to immediately put that block, to put that freeze on the account or to engage in their own sanctions actions. And so we’ve been working with a number of jurisdictions to improve that. So those would be just a few examples

Roger F. Noriega: I was surprised that, for example, only in the last two years did the Canadians adopt authorities to be able to do this kind of blocking access to their financials.

Marshall Billingslea: On the one hand. But on the other hand, they immediately put that to good effect. They’ve gone after the Maduro regime as actively as any other country in the world. They’ve been great partners.

Roger F. Noriega: Absolutely. The Canadians are terrific on this. I didn’t mean, by any means, to criticize. And what kind of cooperation are you getting from Congress?

Marshall Billingslea: Outstanding cooperation from Congress. These are — particularly when we’re talking about the influx. And I talked about cocaine, and obviously, we have heroin coming in now from the Western Hemisphere, the opioid epidemic. I mean, these are not political issues. These are issues that we all agree on the necessity for preventing this and from stopping the illegal proceeds from warping our financial system and the financial systems of other friendly countries.

The only plea I have with Congress is that, particularly with organizations like Diosdado Cabello’s, is the element of surprise is essential. And so mandatory sanctions are things which force us to tip our hand on what we’re intending to do are not helpful. And so we tend to want to push back on that one aspect of help that we sometimes get.

Roger F. Noriega: I’m going to go to the audience in a couple of seconds here. So there’s folks with mics, and I’ll recognize you. And then please, be prepared to ask some questions to participate.

What keeps you up nights about this phenomenon? For example, a good colleague told me that these criminal organizations are now using new methods where they can basically dump all of their money from all of their vendors and suppliers and all into one account. So they never actually move out into the financial system to where it could be detected by folks like you. That was kind of a bloodcurdling reality that these folks are way out ahead of us in certain ways. Certainly, ahead of what we can do in terms of tooling up a bureaucracy and putting a team together to go after them. What worries you when you study this problem?

Marshall Billingslea: Well, I mean, it’s not so much worrying as it’s just recognizing what we’re up against. And we’re up against organizations that, in some cases, command billions of dollars in assets and really can afford the best money can buy in terms of accountants, tax advisers, bankers, and others, who then set up and enable these sophisticated laundering schemes.

The good news is that there’s not an infinite number of ways you can launder money. And so, while some of the details vary on the margins, the core phenomenology I think is something that the Treasury Department together with our colleagues in law enforcement have a fairly reasonable understanding of the workings.

One of the areas, though, where we have to get out in front of this, where we perhaps don’t, I think, at this stage truly understand how this is going to evolve is in the blockchain technologies and in the virtual currencies and crypto assets that are being associated with these different kinds of distributed ledgers. And that’s why we have made — you know, my presidency at the FATF — the singular focus has been to get agreement that there will be the application of anti-money-laundering standards to these digital assets.

We just got that agreement this past month in October, but the devil is in the details. And so by June, we will be publishing the guidance and the interpretive note on how that standard will be applied and how countries, including the United States, how we will all — because it’s a peer-review process, how we’re all going to be assessed on the effectiveness to which we regulate this new technological area.

Roger F. Noriega: Perfect. Terrific. Great answer.

Alright, so a question from that gentleman in the back there. Please, your name and your affiliation. And a question, which is a string of words ending with a question mark.

Q: I have many of them if you like. Ian Talley, Wall Street Journal. Good to see you. Thank you for doing this.

There has been a push in momentum for a better disclosure of beneficiary ownership that seems to continue to stall and has stalled for many years in Congress. And it seems recently that the two primary opponents to this have been the US Chamber of Commerce and the American Legal Association — I forgot — Bar Association.

I don’t think that I can understand their objections, however. For the Chamber of Commerce, I truly don’t understand, particularly when it comes to price transparency being a critical factor in market economies, right, and beneficiary ownership bringing about greater price transparency. I don’t understand the legal argument brought by the ABA. Perhaps you can help me to understand, if you think that there’s worth in their arguments why beneficiary ownership should continue to be private and not a federally, sort of, encouraged.

Marshall Billingslea: Well, I’m not going to try to make the case for others. I’ll leave that to them. But Ian, what I would tell you is, as I mentioned, transparency in legal and the incorporation and establishment of legal operating entities in the United States is essential. And that is precisely why on May 11 we imposed the CDD, the customer due diligence rule, that has gone into effect with our banks. But I think there’s a view by some in the Senate and the House that more can be done, particularly when it comes to incorporation of companies at the state level.

Our challenge is — from a constitutional standpoint is simply that the incorporation of entities is something that is done at the state level. So, it’s not something that we can simply mandate with some kind of statute, as I understand. I’m not a lawyer, but my understanding is we can’t simply mandate that registries — corporate registries be established and maintained and that they be accessible.

I would say, in my private-sector career, the job I had, the teams I ran benefited greatly when we had access to that kind of information because it really sped up their ability to understand who you are transacting with. And I think the secretary of the Treasury has made it very clear that he is both open and willing to work with members of Congress on this because this is a very, very important topic, especially for our law enforcement colleagues.

Roger F. Noriega: Other questions, please. This gentleman up front.

Q: Steve Winters, an independent consultant. This is kind of a small, minor question, but you mentioned the tri-border area several times, and in relation to Hezbollah. I remember maybe five or 10 years ago reading about the presence of a terrorist from the Mideast in that exact same area, but they didn’t particularly mention Hezbollah in those days. It was more al Qaeda, various other people. So could you give a little background about what’s the interest in that particular area for these people? And does it have a history with other groups, not just Hezbollah?

Marshall Billingslea: Well, I mean, look, Hezbollah is a wholly owned subsidiary of Iran, right? So Hassan Nasrallah does the bidding of the ayatollah of the supreme leader. And so

wherever there is Hezbollah, there is Iranian influence by definition. The tri-border area is home to a number of organized Hezbollah groups, amongst them the Barakat group, which both has been the subject of our sanctions as well as some of the recent actions that I mentioned. But it is a large and well-established infrastructure that Hezbollah has built in that area.

Roger F. Noriega: It’s interesting that my sources tell me that Tareck El Aissami’s pilot traveled in and out of a Paraguay about six or eight days ago, and he made his way out of the country.

Other questions? None? Oh, well, no, no. Yeah, let’s go back. Let’s have a follow-up.

Q: Well, just following up on that point, to what extent can FATF be effective in encouraging that regional compliance at judicial level or governmental level in Paraguay or elsewhere, where there seem to continue to be disappearing traffickers associated with Hezbollah?

Marshall Billingslea: It can be helpful, I think, in at least two ways. So one thing that was started actually under the Argentinian presidency by the current deputy justice minister who proceeded me was the inclusion of prosecutors in the various exchanges, training programs, and workshops hosted under FATF hospices so that the prosecutorial dimension to all of this gets considered and factored.

And one of the decisions we made in following onto the Argentinian presidency was to continue that and to further expand the inclusion of the judicial process alongside the intelligence and law enforcement processes that are necessary. The second way that the FATF can and does help is that we work — there’s the 38 countries that are in the FATF itself, but the total network is more than 200 countries because each of the countries participate in regional — FATF-style regional bodies.

And so we work very, very closely with the regional bodies to ensure that the FATF standards are being rigorously assessed when each country has its turn at bat. And it’s anti– money laundering, it’s counter of the financing of terrorism regime, it’s counter- proliferation. Financing regimes are being assessed.

And so it’s really that driving of the standards, and greatly enabled by the fact that the private sector, the financial institutions watch the results of these mutual evaluations very, very closely because it’s an indicator of risk. And so again, it’s that power of working with the private sector but ultimately insisting on the adhering to standards.

Roger F. Noriega: Well, I have one more question, and then we’ll wrap it up.

Q: Yes. Douglas Farah, National Defense University. In our field research, we keep coming across Turks now in the sale of gold, the purchase of gold, weapons shipments going into Central America, particularly, a lot into Panama and elsewhere. A lot of money movements through Turkey. Is that something you’re observing now as well, and is Turkey playing a new role in the architecture of these criminal states as they move their resources?

Marshall Billingslea: I wouldn’t be able to comment on all the specifics, but I would say that one of the areas that we are urging awareness of is the massive looting that’s now being

done in Venezuela of gold. It’s being done, not just illegally, but it’s being done at enormous environmental expense and at the expense of the indigenous populations there, as the regime has basically awarded itself control over a huge percentage of the country and is now stripping this gold out and dumping massive amounts of chemical and mercury contaminants into water supplies. And in tandem with that, we’ve really stressed the importance for companies and countries to be vigilant and to understand what’s happening here. And we have highlighted the fact that a lot of this nonmonetary gold appears to be destined for Turkey.

Roger F. Noriega: Well, thank you very much. You’ve handled all of the topics very thoroughly, obviously. I think that the administration and most of the close observers would say that, in this area, definitely has exceeded expectations. And I think that the audience would agree that, after witnessing your work here today, your presentation, your appreciation of the issue in some detail, that you’ve contributed a lot to that success. And we thank you very much for helping us out this morning.

Marshall Billingslea: Well, thank you for hosting.

Roger F. Noriega: Thanks.

Please keep your seats. We’re going to ask other panelists to join us. And we’ll continue immediately if Celina and Doug and Emanuele. Let me read the bios here briefly.

Celina Realuyo is a professor of practice at William J. Perry Center for Hemispheric Defense Studies at the National Defense University and has two decades of international experience in the public, private, and academic sectors. She has experience as an international banker with Goldman Sachs, the State Department’s director of counterterrorism finance programs, and a professor at the National Defense University, George Washington University, and Joint Special Operations University.

Doug Farah is president of IBI Consultants LLC and a senior visiting fellow at the Center for Strategic Research at the National Defense University and works as a subject-matter expert on transnational organized crime and threatened networks works in Latin America, advising both the United States government and the private sector.

Emanuele Ottolenghi is a senior fellow with the Foundation for Defense of Democracies and works with its center on sanctions and illicit finance. He is an expert in Hezbollah’s enlisted threatened networks in Latin America and Iran’s history of sanctions evasion. He previously headed the Transatlantic Institute in Brussels.

I thank all of our panelists, all of whom participated to one degree or another in the production of this report that AEI issued in June 2017, “Kingpins and Corruption: Targeting Transnational Organized Crime in the Americas.”

Celina, I’ll ask you, what did we get right here? Where did we fall short of appreciating the phenomenon? What’s happened since we’ve issued that report? Give us a bit of a summary.

Celina Realuyo: First of all, I want to thank AEI and the Federalist Society for focusing on such an important topic that seems like a faraway game that actually affects all of our communities here. As Marshall pointed out, the opioids crisis and the gang issues here in the

United States are becoming much closer to home than when we wrote this, which is about a year and a half ago, we started on this project. I think what we did was highlight for the incoming administration the importance of the Western Hemisphere, which had been kind of eclipsed in the last 20 years.

And then, more importantly, in retrospect, we actually divided up the chapters looking at the threat networks. But I have to pessimistically say that, in the last 18 months, the threat networks have gotten actually stronger and are becoming a more daunting challenge. So we just take a look — I just came from Mexico. I’m going to Bogotá, Colombia, on Thursday. Just the amount of drug trafficking and drug production in terms of heroin and cocaine is unprecedented. And this is globally, not just in the Western Hemisphere.

And we’ve actually seen this, unfortunately, hit the streets of the US, where the CDC just actually proclaimed that in 2017, an average of 196 Americans have died of a drug overdose. Unfortunately, it’s coming from over our borders into our communities. What we’ve also seen is when we looked at this issue of transnational organized crime, they used to be localized mafias. But we’ve really seen — and I know my colleagues who I worked and traveled quite a bit with — it’s gone global. And we’re actually starting to see external actors, which I know the others are going to address.

But what we’re really frightened about is also not just the drugs that are coming in, but we’ve also seen how commercialized human smuggling and human trafficking have become. And unfortunately, it’s been epitomized in the caravan. So for those who don’t actually follow the caravan, the inklings and the initiatives of the caravan was to actually protect the migrants themselves from being abused by coyotes or traffickers who would either extort them or abuse them or turn them into sex slaves. But what we were seeing is the same routes are being used coming into the United States and around the region, but what we’re seeing is the magnitude, the velocity, and the wealth and the violence accompanying.

I’ve been able to travel to — all the places that Marshall described this whole year. Whether we’re talking about Brazil, Argentina, Paraguay, and the tri-border, really we’re seeing a transformation of the drug trade. Here in the US, we’ve actually decreased the consumption of cocaine by 50 percent, except in the last year, while Colombia continues to produce even more. Those drugs have to go somewhere. And they’re going all over Latin America, but also transiting in order to reach very lucrative markets in Europe, where it’s about $100,000 a kilo for cocaine and $180,000 in Australia and New Zealand.

So this is where you’re starting to see others getting involved, whether it’s the Chinese mafia or the Russian mafia. The tentacles are getting longer and broader. And this idea of also instead of being specialized just in your country, we’re seeing groups like the PCC in Brazil and the Mexican cartels who’ve always been pretty global, go even further afield than just the Western Hemisphere.

Roger F. Noriega: Well, I think one of the points we made was that a lot of this organized crime and a lot of what’s happened in Venezuela and Central America has been all about these global networks optimizing the supply chain of illegal drugs to the North American market. And so people who don’t know how transnational organized crime impacts their life, the caravan is a symptom of disintegrated institutions. Economies have been undermined, desperate people are displaced, and they will do whatever they have to do to survive and sit

out on a 1,600-mile trek on foot — two-month trip on foot to try to find a way to make a living. And that’s how it impacts us.

Doug, I’m going to go to you next. You focused on the evolution of the criminal state. I think Marshall Billingslea did a terrific job sort of explaining how these criminals in Caracas have basically busted out Venezuela country in an oil company, PDVSA, the way, you know, gangsters in New York would bust out a pizza joint. Except, you know, it’s an oil-rich country, and they’re wrecking the economy and looting it.

These criminal states aren’t born overnight. I mean, are there signs that we should have seen along the way as Venezuela was falling apart and moving in this direction as to say — that sounds too passive — as these criminals took it in that direction? Where we could have made a difference along the way?

Douglas Farah: I think there are multiple ways. And thank you also to AEI and the Federalist Society for providing this forum.

I think there are multiple things that could have been done way earlier. And I think our fundamental misunderstanding of what was happening in this criminalization of these states was that we didn’t understand initially that it was a joint criminal enterprise that wasn’t Venezuela. It was Venezuela, Bolivia, Nicaragua, El Salvador, Serenum, all engaged in an ideologically coherent and economically melded fashion to move tens of billions of dollars out and around in a coordinated criminal enterprise that happened to be composed of states.

And I think we fundamentally underestimated the size, the magnitude of what we were looking at. I know I did. And I think that we also were extremely tolerant and complacent with the deterioration of the democratic institutions as they went forward in these countries. There were a lot of people in Latin America, in the United States, willing to make excuses. Initially, it was for Chavez, then for Daniel Ortega, for Rafael Correa, for Evo Morales. They were doing this. They were doing that. We didn’t understand when the FMLN came into power in El Salvador, particularly in the 2014 election, that that was sort of the coronation of another element to the criminal enterprise stepping into place.

So I think we underestimated and didn’t hold firmly enough to our democratic convictions to call out undemocratic behavior when it was clearly visible, documented. And we were constantly making excuses for the groups going forward on this authoritarian path.

And that authoritarian path was fundamentally essential to creating the criminal enterprises because you had to criminalize the independent media, you had to criminalize the opposition, you had to criminalize the Catholic Church. You had criminalized everything that wasn’t yourself as a state because the state was the criminal, and they had to use these mechanisms to combat what would be normally the rule of law in other institutions.

So I think there were multiple indicators, multiple steps that in not understanding what the project was, we let slide a lot of things that could have been taken care of much earlier.

Roger F. Noriega: Very well stated, and we’ll come back to you a little bit about where those mistakes were made and who some of the authors of this criminal network were who were involved in this.

Emanuele, you focused an awful lot, as everyone knows here, on Hezbollah. I’d like you to sort of explain the network in the Americas. What’s Hezbollah up to? And specifically, you know, we’ve cited in our report the Iman Juma case, Hezbollah involved in a very sophisticated international network, you know, to sell drugs in the United States, working with Colombia and Mexican cartels, moving it through Venezuelan territory. Moving money into the Lebanese banks, Russian banks. How many foreign networks are out there like that that we need to be concerned of how Iran and Hezbollah projects into our neighborhood?

Emanuele Ottolenghi: So first of all, thank you to the organizers for having me today. A very important topic, very timely.

The undersecretary mentioned the tri-border area, which is really one of the areas I focus on the most. And there is a reason for that. The tri-border area, after Hong Kong and Miami, is the third-largest place in terms of commerce and therefore of financial flows. And you know when you read the literature on the topic, you oftentimes encounter catchy headlines such as [inaudible] in the jungle” or such, such things because there is this perception that this is a remote place. It’s a remote frontier in the periphery of state and Latin America, so there must be some dirt roads and some shady traffickers.

But the truth is that, unlike a lot of the frontiers in Latin America, this is a place that has a metropolitan area of about a million people divided among three countries. Because it has one of the most important and most beautiful tourist attractions in the world, the Iguazú Falls, it has a vastly developed infrastructure of hotels, of money exchanges, of tourist agencies, of transport. It has three international airports. [inaudible] alone handles 4.5 million passengers a year.

So this is not a remote outpost in the jungle. This is as developed as it gets in Latin America. That’s precisely why you have so much money laundering and terror financing.

Now, as to your question about the networks, Hezbollah leverages its expatriate communities, very much like the Italian mafia used to do and continues to do. One of the DEA agents that used to work on the project, Cassandra, was interviewed in The New York Times shortly after the Iman Juma case Lebanese Canadian Bank case emerged, and he called them, “Gambinos on steroids.” And I think it’s very apt because you have an ideology established or founded on a religious worldview that leverages a social clannish structure in order to advance its goals.

So wherever you find these communities, you will find Hezbollah investing heavily in the communal and social infrastructure to maintain the loyalty of the community and to leverage it to its own purposes. And now in the TBA, as it happens, you have the largest Shi’a, Lebanese community in Latin America, about 30,000 people. It’s not a very big community in absolute terms, but it is a significant one. And it is heavily involved in trade. And all of the families that, you know, people who get the Treasury press releases are familiar with. The Jumas, the Toboggans, the Al Amin. You know, long list. The Barakats, the Abdallahs. They are all there. They all have a presence.

The Barakats were mentioned before where the Barakats have one of the most senior figures in the Hezbollah power structure, the deputy to Abdullah [inaudible] in, you know, the business affair components of the external security organization is a Barakat, and he’s the

brother of the Barakats around the Barakat network in the tri-border area. So you have this vast network.

And each of these families have the presence, not just in tri-border but also in Macao in Colombia and in Venezuela and maybe in Cologne and very likely in Dearborn, Michigan, and perhaps in Florida. And then, you know, further afield in West Africa, in Hong Kong. So the family network, the clannish structure superimposed to the ideology and the religious commitments are all that Hezbollah leverages.

What do they do? They do two things. They provide financial services and logistics to organized crime. Think about Western Union, think about DHL. That’s what Hezbollah does for the cartels. The cartels may have control of the territory, but they don’t have a global network. Hezbollah provides that.

Now, in my native language, we say that “appetite grows as you eat.” So that’s the other thing that they do. Not only do they provide the services, but over time, they have actually figured out that they can become themselves traffickers and do it better than their clients. And so, in addition to moving the drugs and laundering the money for their clients, they have started taking payments in kind and trafficking it themselves. They have started supplying the cartels with the precursor chemicals needed.

And so they have infested the whole supply chain of organized crime. And in the process, of course, to make it work, they have also penetrated the political systems of their societies and bought off the politicians. And that’s the other thing. It’s not just the environmental disaster or the degradation of security and the quality of life. It’s also that slowly they’re able to buy entire political systems and turn them into their own adversaries and their own allies in perpetuating this system.

Roger F. Noriega: Where would you find these Hezbollah cells in the Americas? The bigger operations.

Emanuele Ottolenghi: In a lot of places. I mean, as you know, last year, there were two very prominent publicly announced arrests in New York State, Ali Kourani and Samer El Debek, two Hezbollah operatives. They were not primarily engaged in money laundering, although when you read the indictments and the other publicly available documents, you see that they’re engaged in also commercial activities. And one of them spent significant time in Lebanon, as recently as 2011, training on small arms including RPGs. The other one was a bomb maker, the one who went to Panama and did surveillance on the canal, the US Embassy, and the Israeli Embassy.

So these are people who were, you know, very high up in the food chain when it comes to organizing terror attacks. And who are the people who are facilitating these two and other such characters in their endeavors? They are the business communities. They are providing the logistics. They’re providing the infrastructure.

And so wherever you find this high concentration of Shi’a communities with the links back to the motherland, with these prominent clans that are linked through business and through relatives in the clerical establishment and so on, you will find that part of that community is actually beholden to and complicit with Hezbollah and its activities.

Roger F. Noriega: Doug, we were chatting before this event and then alluded to it here: Criminal states don’t just appear. They evolve, they grow stronger, they expand their operations. They’re able to operate with impunity. They become more bold, link up with others, and become part of a global network. In terms of whether we could have stopped this, you know, Assistant Secretary Billingslea has spent a lot of time talking about Diosdado Cabello, who for some reason wasn’t sanctioned for, you know, years after US authorities had delivered a package to Treasury to have that decision made. There’s an agency process.

You and I have been wondering: What has Jose Luis Medina done in life to evade accountability? A kingpin operating in El Salvador in the middle of all these things. You know, FARC negotiations, FARC money laundering, operations. He hasn’t been sanctioned. Has there been a failure over the years of US officials, bureaucrats, diplomats to appreciate the problem as it was coming down the road and put some roadblocks along the way that might have slowed the evolution of this growing threat?

Douglas Farah: Well, I think there has been a failure of policy over time, based on a failure of understanding of what they were saying. I think, when I was in [inaudible] a couple of years ago, General Butler was talking about the Russians and saying, essentially, we don’t understand the Russians because we think we’re all playing soccer and they’re playing rugby. So we think the rules of soccer apply. Somebody doesn’t mean to take out a yellow card or red card, and we think everybody is playing by the same rules. But they’re playing an entirely different game, and the rules that we think matter don’t.

And I think the Boulevardiers are playing something very different from what we thought were the rules of democracy. And we’re all in the OAS, and we’re all going to do this and that together. And we didn’t understand they had fundamentally disengaged from that entire process and were playing, you know, rugby on a soccer field with different measures of success in where they were going than what we assumed what the game was. And so I think we took a long time to begin to figure that out.

I also think that the enormous lack of attention to the region was fundamentally important. Because if you recall from the last counter-organized-crime strategy developed at the end of the Clinton administration, there wasn’t a new one until 2011 under the Obama administration, and that was essentially an unfunded mandate. And so you had more than a decade — you had almost 15 years with no new policies in place. And when we got a policy, it was essentially without the resources to go with it, asking people to do more with what they already had.

So I think that that was an enormous problem. And I think the lack of resources and interests, I think, you know, and talking with people over multiple years about the issues that we’re developing in Latin America, the basic feeling was, “If it doesn’t go boom, we don’t care right now.” Because we have Afghanistan, we have Iraq, we have Iran, we have North Korea, we have, we have, we have. And they’re right. They have all those things.

My counterargument was when we looked at the number of very high-level Russian delegation visits to Latin America, they out-visited the US, either going to Russia or coming down from the assistant secretary level up. Something in the order of like, in the period of six years, we were looking at something. I don’t remember the exact number. We have done something like 17. The Russians have done 170. Like the Russians have other things to do too, right? They have other priorities, but they found the time to send the president, to send

the defense minister, to send the head of the Senate. All these people were visiting Latin constantly.

So the excuse that we don’t have the bandwidth I think doesn’t wash. And I think that we felt we didn’t have the bandwidth sort of talked ourselves into that. But I think basically it was not understanding the order of magnitude of what we’re looking at. And in fact, the entire Venezuela issue and what they were able to finance with Cuban backing and intelligence and then across the region was a gigantic criminal enterprise that had very little to do with anything regarding politics per se, as we were accustomed to saying. And as they succeeded in shutting down the opposition and as they succeeded in criminalizing the media and as they succeeded in doing those things, those voices weren’t coming up, and we weren’t looking down there.

And so, you know, I don’t think anybody set out to make it happen, but I think the cumulative result of that lack of attention over time, that lack of understanding, has really allowed that process to go much further in Latin America than it would have had we been engaged and paying attention.

Celina, you surprised me earlier when you said a point of fact: These networks are stronger now than when they were when we initially looked at the subject. How are they stronger? What do we need to do to be more effective in confronting them?

Celina Realuyo: Well, they’re much more nimble, right, than we are. It takes us forever to get anything done in terms of the legislative mandate, the legal framework.

So in the defense of the new administration, but more importantly, pursuant to what we were looking at, they have made tremendous strides. First being able to include transnational criminal organizations on page 11 of the National Security Strategy is actually a very forward-leaning position. And this idea of creating the task forces, which Attorney General Sessions just announced a couple weeks ago, helps us to focus on these groups that included Hezbollah, which was a good surprise for those of us who follow it, in addition to the Mexican cartels and the gangs.

What we still see, though, is that because these groups that are illicit actors — whether they be terrorists, criminals or proliferators or traffickers — they’re not bound by the same concept of sovereignty and borders and rule of law and human rights that we are. And there’s one thing we haven’t actually talked about — is the rampant corruption throughout the region is what gives these groups the space and the ability to actually corrupt what Doug always refers to as criminalized states. Because they’re actually providing an alternative state by providing jobs and security. And that as you see in parts of Central America, the government is not present, but someone is governing them even though they’re not duly elected.

So what we are seeing is they move much faster. And while we were down in the tri-border, we’re actually doing a ton of training, which is great, but we also see that our counterparts at Justice handicapped because it takes so long to get the legislative framework into position in order to then pursue terrorist financiers, money launderers, and criminals, and then we’ll probably bring them to justice. And later on, do the extradition is that we all hope to achieve from the US perspective of people who are on the kingpin list.

Roger F. Noriega: So in various stages in my career, I’ve made my way to the tri-border area. And it’s interesting, the Brazilians were absolutely convinced themselves that the talk about terrorism was a contrivance by the United States to get into their business. That there wasn’t a terror problem, neither a drug problem. Really, it was someone that was helping somewhere else. Obviously, there are professionals in that government that have always wanted to work with us that were forward-leaning, different agencies doing better in terms of recognizing the threat and making themselves good partners. But Brazil has been a problem.

We had an election recently, as everyone knows, and a new man, Jair Bolsonaro, winning handily that election. He has startled people for a lot of different reasons. And I must say that the commentary is absolutely hysterical in every sense of that word, in characterizing the guy. And I think part of it is that the left is rejecting socialism in some of the leaders of that, you know, rule of some of their favorites. And also that he wants a positive relationship with the United States.

And I’ll ask if anyone wants to weigh in on this. What can we expect from Brazil? What’s the nature of their involvement in this problem? You know, not as a government, but the fact that these organizations operate in their territory, put money into their banks. What can we expect from the Brazilians to do?

Celina Realuyo: I’ll start. I was just actually there for two weeks in September, and right when this frenzy of what was going to happen with the election that was taking place. So we’re quite optimistic because Bolsonaro is going to bring kind of crime and justice, whether it’s Mano Dura or not, we’ll have to see. But we don’t pay attention to what’s going on to Brazil, but they’ve actually experienced unprecedented levels of homicide and violence and insecurity, which after the corruption piece was probably the number two when they were doing the exit polling in terms of what the average Brazilian voter was kind of protesting.

And we’re quite optimistic. And you and I were there because I worked with you when we set up the three plus one, which for those who don’t know about this, it was after 9/11. It was to basically unify the efforts of Brazil, Argentina, and Paraguay. Plus one is the United States, and we were actually talking about this when we saw our counterparts in September down in Argentina of resuscitating this idea because they do realize now that a lot of this convergence that we’ve written about of terrorism and crime and then more importantly, the ultra-violence that groups like the PCC and the Red Command, Comando Vermelho are starting to espouse. And these links that their groups are having with the assistance of the FARC or connections with my Mexican cartels is really quite disturbing. And it’s really interesting to see what his first steps are going to be on trying of deal with what they call now, “criminal insurgency,” is the very term that they’re using now in Rio de Janeiro.

Roger F. Noriega: Interesting. Interesting. Do others have something to add that [inaudible]

Emanuele Ottolenghi: Well, the only thing that I would add is, again, going back to the tri- border area, we tend to look at borders as, you know, dividers of jurisdictions and very real things that we take into consideration that states have to respect and factor in. For organized crime and for the terror financing network as well, of course, these are just the obstacles to go around. And the tri-border is a perfect example because the Hezbollah networks there play the structural weaknesses or the lack of cooperation or communication between the three countries to their own advantage. I mean, the Barakat scheme that was exposed by the Argentinians in July is a perfect example, where, you know, 14 individuals were laundering

money in the casinos on the Argentinian side, but all of them were really sort of, you know, conducting business in the Paraguayan side while banking in the Brazilian side and living there.

And this encapsulates the problem. And it’s not just a small problem like that scheme, which was overall worth maybe a few million dollars. But, you know, Lava Jato — and there is a section of the Car Wash investigation worth $1.6 billion that went through Paraguayan. And the same Paraguayan money exchange housing [inaudible] that was used in that scheme is central to a $1.2 billion scheme in Paraguay called Mega Lovato, which connects to Hezbollah because some of that money was being wired to Dearborn, Michigan, to companies that were then being used by Hezbollah for the used car sales in West Africa.

So, Brazil is critical because it is the largest country, because it is the most important economy, and because its financial system has been suborned for so long by organized crime and by terror finance for their own purposes and the political class up to now, and therefore that bureaucracy subordinated to it have been unwilling and unable to go after these networks. Let’s hope that this change, of course, will readdress that significantly.

Roger F. Noriega: Doug, I want to say a four-letter word here: Cuba. Those of us who watch this very closely, what’s happening in Venezuela, Nicaragua, Central America more generally, Columbia with the FARC. The fingerprints of Cuba are all over this. I testified before the House Government Reform and Oversight Committee and said, you know, we finally need to confront this, the fact that Cuba is not really a state. It’s a — it’s a gang. It’s criminal outfit.

You know, when someone corners them, they all block aid and run up to the UN podium and stand in front of the flag, but it’s basically a criminal enterprise. And even the ruination of Venezuela with the refugees, you know, it’s a feature, not a bug. You know, driving people out of your country, we’re going to give you trouble as you try to consolidate a totalitarian government is part of the Cuba playbook. I don’t expect you to be nearly as ideological as that, but give us your sense of what role Cuba is playing in all of this.

Douglas Farah: Well, I think it’s interesting in looking at the history of the Bolivarian Movement, how influential Cuba was from the beginning. I think the most sort of interesting thing to me is when Evo Morales — and he writes about this himself — goes, in 2003, to tell Fidel Castro he wants to start an armed insurgency in Bolivia and Fidel says, “Don’t do it. And you’ve got to go to elections, rewrite the constitution, and stay in power forever that way.”

So clearly, the Cubans sort of adapted in ways that were much more forward-thinking than I think we gave them credit for. Able to understand the moment for armed revolution had passed. What they worked very hard on is establishing their intelligence structures across the Bolivarian structures. They don’t have much else to offer in terms of natural resources and things, but they do have a really good intel and counter-intel.

And if you look at states like Bolivia, where I grew up, all of us knew, because of my class, upper-middle class, if we got in trouble what was going to happen. If we went to prison, someone was going to say, “Oh, Douglas, my father knows the mother of the colonel, and let them him out,” and I’d be out in 48 hours. It was going to happen. That’s just the way the social fabric was done.

What the Cubans brought — and we can see this in the early days and with Evo Morales, and I think it’s that way across all of these countries. They arrested governor of Pando called Leopoldo Fernández on this. And it was like, “Oh, Leopoldo will be out in a few days because he was Leopoldo Fernández,” right? He was in jail for almost 10 years. Why? Because the Cubans are running the intelligence instructions, and they didn’t care who you were related to.

And I think the value the Cubans brought to their structures, besides the capabilities, the ability to run intelligent structures in countries that had never been able to run these things internally, was the ability to totally disrupt the social networks that gave certain parts of the society levels of protection. They were suddenly gone, and it’s terrifying when you’re suddenly that exposed. There you are.

And the counterintelligence, the ability to mount manifestations, protest against the government, cause overreactions, etc., have been incredibly important.

But I think, you know, the enduring myth of the Castro brothers I think was also ideologically quite important. And especially, Hugo Chavez’s relationship with Fidel. And we considered him as a father, and he talked about this endlessly. So I think they were both an inspiration but in implement, I don’t think Bolivia, Ecuador, particularly as small countries, Venezuela could have gone to the authoritarian model they did without the express Cuban support for their intelligence apparatus to be able to move forward.

The ability to run false flag operation, the ability to run front companies, all of those things that they’ve done so well for many years, it was suddenly transferred to these countries who had no knowledge of how to. “Well, this is really fun. We can do that. Wow. We can have an embassy that runs in the criminal enterprise. How exciting.” You know, it hadn’t occurred to them before.

So I think it’s fundamental to their success in moving down in authoritarian mode and their ability to endure it. I mean, who has lasted longer than the Castros, right? If anyone knows how to stay in power and get the opposition to do stupid things and divide them and infiltrate them, it’s the Cubans. And it’s worked like a charm in Venezuela. It’s worked like a charm in Bolivia. It’s worked like a charm. Ecuador, not so much. They finally backed out. But they’ve had this remarkable success in Nicaragua and keeping things completely divided and destroyed. And that model comes directly from the Castro brothers.

Roger F. Noriega: And the impression, you know, for a lot of people is that Chavez was sort of seduced by them after his ’92 coup. And I think it’s pretty apparent he was working for them even before then and they stage managed right up to killing Hugo Chavez. They stage managed the transition and handpicked Nicolas Maduro and no [crosstalk].

Douglas Farah: And hopefully the best decision. But yes, as they’re managing their own transition now.

Roger F. Noriega: Right, absolutely. And in point of fact, there was someone else who called this out, this Cuban conspiracy, a lot earlier than this, a long time ago. It was at the Ibero-American Summit where Francisco Flores as the president of El Salvador confronted

Fidel the way no one ever had in public, ever. And I would submit that his imprisonment and his death was the Cubans finishing up some business.

I’m going to throw it open to questions.

Man: In the back here. Gentleman. Your name, affiliation, and —

Q: I’m glad you don’t have your glasses on.

Roger F. Noriega: Yeah, I see you. You’re an inquisitive guy. You’ve got to encourage others.

Q: I hope they elicit good answers. Two questions. One very quickly. The extent that Iran has pressed on the sanctions and is going to fight back sort of asymmetrically. To what extent are their use of proxies on US soil a risk? You alluded to that, Emanuele, but you did not state it outright. One.

Secondly, is a fundamental reform that allows the address of TCOs within the Southern or Western Hemisphere possible given the level of corruption goes from bottom to top?

And finally, just a note, I was accosted by two presidential guards under the Chavez area and in Caracas, along with the Ministry of Justice guys. Later found out in talking with them that they had been trained in Cuba, these Venezuelan presidential guards.

Emanuele Ottolenghi: So the risk, you know, those two cases I mentioned clearly highlighted and show that the risk is both on the American soil and on, you know, soft targets such as embassies, such as cultural centers in Latin America — that the risk is very much there. And you know, these networks tend to be acting, you know, for both purposes.

You know, we — we tend to think that, “Oh, you know, they’re just doing money laundering. It’s not really terrorism. You know, some of the money might go to terror financing, but it is not really, you know, people with bombs and guns.”

The business affair component of a Hezbollah is an integral part of its external security operation. It’s part of what Europeans call the military wing of Hezbollah. You know, these are people trained for operational purposes as well as being savvy business people. So the risk is very much there.

And the other point is you have a booming market for drugs, and you know, we haven’t addressed it. But part of the reason it’s booming is not so much that the crops are so good. It’s that we like it so much. You know, if the demand was not so, you know, high, it might be a different story. And that’s something that policy needs to address, but it’s not for today, I guess.

So you — you have increasing opportunities for huge margins of profit. And two, you have the sanctions pressure you mentioned, which will make, as it did during the years, 2010, 2013, reliance on a steady flow of funds from Iran more erratic. So, you know, when it comes to Hezbollah, the incentive to actually engage in these activities, you know, more than in the past, you know, is going to go up because they need more money. They can depend on Iran less, and there is a lot more money to be made.

And again, you know, you start in the Colombian plateaus, with, you know, $20, $25, $100 a kilo of cocaine, and you end up in Sydney, at $250,000 a kilo and everything in between. Seventy thousand in Beirut, 120 in the gulf, 50 to 170 in New York. The margins of profit are huge. And if anyone comes and disrupts, you have the means to actually teach them a lesson.

So, I anticipate that this problem is going to become worse. And therefore, there’s a need for a lot more aggressive, across-the-border action by the United States. Because once again, you know, we want to get convictions and extraditions, not only sanctions. We want people to be locked up. We want their facilitators to be punished. The corrupt politicians, the bankers, and all of these people. And this cannot continue at the pace of nine designations a decade, which is what we’ve had in the tri-border area and Latin America when it comes to Hezbollah,

Douglas Farah: And can I just say on the corruption, I think that’s also the fundamental issue, right? One of the things that we’ve been talking about in the policy world is that we have right now very little overlap between the US agenda in Latin America and the Latin American agendas in Latin America. Or we’re still doing counter-narcotics and illegal migration, and they’re worried about homicide rates, violence rates, poverty instability, etc. And the only thing that brings these two agendas together is the commonality that corruption is driving all of those phenomenon.

And so if we re-couch our agenda in terms of corruption, I mean, you look at El Salvador where you had Tony Saca from ARENA confess to $600 million. Mauricio Funes, FMLN, comes along and steals $700 million as the current government is probably significantly past that. And so I think it’s nonideological across the border phenomenon, where you’re now talking simply stealing from Casa Presidencial $600 million. That’s not a small thing to be able to do. Right? That takes some real foresight and planning to execute.

And I think that’s the disgust that’s driving people out there. It’s destroying trusted institutions. It’s making people think they can’t live in their countries anymore. They’ll do anything to get out, is driving the violence rates up, etc. Delegitimizing the state in its totality and all of those things. So I think if we’re going to have an agenda in which most Latin Americans can buy into and that will also help us meet our ends, it has to focus on the corruption issue.

Roger F. Noriega: I had to take one more question that is going over right here. The gentleman right here. You have to see if this is as good as Ian’s question.

Man: [inaudible] from El Salvador, former minister of finance of El Salvador. I haven’t heard anybody in the two presentations talk about China. And if we look, for example, at the fact that web development agencies or the IMF or, for that matter, assistance and aid from developed countries to developing countries with this new player in the architecture with no participation in the parties club or other rules and regulations, it becomes or it could become a bottleneck for the sort of things that we are talking about here.

So, in your opinion, how do you see the role of China in the different elements that each of you have addressed? And is there an opportunity to convert them into alignings of the goals instead of the support that they might be providing or contemplating to provide to some not so respectful entities?

Roger F. Noriega: Celina.

Celina Realuyo: So if we take a look at the — or we say the above-board Chinese investment in Latin America, it’s of their own self-interest in terms of expanding markets and then access to resources. So we’ve known that for a long time.

So I teach at the National Defense University. What I’ve noticed the last three or four years, many of the students who are applying who are coming from security and defense institutions have all seemed to have gone to China. It’s a very interesting thing in terms of exchange programs. And we’ve actually seen Secretary Mattis just did a tour of South America, where he talks about rivalries of Russian influence and Chinese influence in Latin America.

Now, with my terrorist-financing and my money-laundering hat on, we also know that Chinese banks — and I think Doug is going to address this — are extremely interested in being the financiers and the facilitators for the TCOs in the region. And the piece that I’ve just finished, I wrote a big piece on the opioids. I call it “New Opium Wars.” We’ve actually seen that China continues to be the number-one purveyor of precursor chemicals and, more importantly, illicit fentanyl that’s killing people on our streets. So these are the pieces, but I’m sure my colleagues have a lot of comments on that.

Douglas Farah: I would just say, one of the things — my research coordinator, Caitlin, is here. We mapped out the ports that China controls in Latin America, and there are in the order of 44 ports where China has. Just in the Western Hemisphere, including six in Mexico and elsewhere. Those are the ports where the precursors are primarily coming in from.

If you look at El Salvador, what does China do? It comes in and pops down $50 million for La Union port, which no one else has ever been able to develop. They did no feasibility studies, no environmental studies. And why couldn’t no one else develop it? Because there are cross-currencies so you have to dredge it constantly, and it’s in the middle of multiple other ports with no significant value in and of itself.

So they come in. They want to buy two small islands, for whatever facilities they want to establish there, and they put down $50 million dollars on a port, which has no utility to them in terms of economic benefit. Now, it may have other utility to them, and they bought up land around Puerto Corsain, which is just down the road, which is a port controlled by the FMLN as a median for their smuggling activities.

So you have to wonder what the end game is there. None of it is good. I would argue, in the case of your country, that very little of it is going to be beneficial. This idea that you’re going to create tens of thousands of jobs has never happened. If you look at Brazil now, which is deeply sorry for its relationship with China because it brought none of the benefits and a massive debt with it, you know, I think there’s lessons to be learned there. I think that the FMLN in particular, I think the Sandinistas will be the next to jump — are very interested in survival. And what the Chinese will offer them is short-term survival with a lot of money and access to banks and access to other things that will allow them to carry out criminal activities. It will be much more difficult for the United States to monitor and bring some short-term benefit and a lot of long-term grief to the countries where they are.

Roger F. Noriega: Well, I’m going to stop right there. Thank you very much for your terrific presentations. Before we end this panel, I just wanted to acknowledge that much of the work on their initial report and then putting this three-panel, if you include Mr. Billingslea’s contribution, putting this together is Andres Martinez-Fernandez, who was is a colleague of mine. And I wanted to make sure that he was recognized.

We’re going to end this panel. Take a few minutes to bring together a panel that my colleague, Jim Dunlap from the Federalist Society, will chair, along with representatives from the Justice Department, former ambassador to Venezuela, and Bill Brownfield will also be on that panel. So please stay where you are, please, for this next panel.

Let me ask you to join me in thanking our panelists here for their contribution. That’s it. Well done.

James Dunlop: We’ll get started with our second panel. This is Welby, Patrick, Clay. And so, one, two, three, four. Great.

Man: Okay. It’s okay for me to orient this because I can’t sit down?

James Dunlop: They tell me it is. Yeah, it should be fine. Are we all set?

All right. Welcome to our second panel of the afternoon at our “Dismantling transnational organized crime networks in the Americas.” I’m Jim Dunlop. I’m here today representing the Federalist Society. I’m also a lawyer in private practice. I practice white-collar criminal defense of companies and executives who do business in Latin America. And so my clients encounter these problems and many others in the way of corruption and rule of law issues there.

I’m joined today though by a very distinguished panel from whom I’m excited to learn. Starting on my right with Welby Leaman, who is the senior director for global government affairs at Walmart. He has federal experience as trade counsel to the House Ways and Means Committee, where he led the passage of the US-Columbia trade agreement, and at the US Treasury, where he worked on the issuance of the Committee on Foreign Investments in the United States regulations. So this is Welby Leaman.

Next to him from the Justice Department is Patrick Hovakimian, who’s currently associate deputy attorney general at the United States Department of Justice and the department’s first director of counter transnational organized crime. He previously served as an assistant United States attorney for the Southern District of California.

To his right is Clay Fuller, Jeane Kirkpatrick Fellow here at AEI, researching authoritarian governance, illicit finance, and corruption. He’s also a published author of multiple journal articles and opinion pieces, in addition to having testified before the Senate Judiciary Committee and the Helsinki Commission on issues of illicit finance and trade.

And finally, at far stage right is William Brownfield, currently a senior fellow at the Center for Strategic and International Studies. He’s previously served as US ambassador to Chile, also our ambassador to Venezuela and Colombia, and he served as assistant secretary of state for international narcotics and law enforcement from 2011 to just last year, 2017.

I’m honored to be here with these panelists today. I’m not speaking for my law firm or for the Federalist Society when I ask questions or make comments on what they have to say. I also thank the American Enterprise Institute for hosting this panel and this event and having me here today.

I want to start, Mr. Hovakimian, with you so that you can talk to us about the task force, which was just for him two weeks ago — or announced two weeks ago by Attorney General Sessions. And tell us what it’s about and what its goals are and what you intend to do.

Patrick Hovakimian: Jim, I’m happy to. Thank you for having me here. Thank you to AEI. I remember fondly being an intern in Washington many, many years ago and being in a different, decidedly less palatial space than this, but nevertheless always enjoying my time at AEI. And I’ve been a Federalist Society member since day one of law school, so it’s particularly special for me to be here today. So thank you.

The attorney general announced a few weeks ago, as you mentioned, a transnational organized crime task force. I get strike forces and task forces mixed up. We don’t know the difference really, but this one is a task force. He designated five priorities: the Sinaloa Cartel, CJNG, Clan del Golfo, Lebanese Hezbollah, one other one, and said, “These are the priorities of the administration, and we’re going after the full bore.” The task force came out of a DOJ’s singular response that’s distinct from our whole-of-government response, which I’ll get into in a minute. It came out of our singular response to the president’s executive order that was issued last February. It was one of the earlier executive orders of the administration. And as all of you know, it was designated toward fighting transnational organized crime.

The priority and emphasis on this comes from the top. It comes from the White House. The attorney general has been strong on for a career. He designated these five groups and established this task force, and that’s just the latest step we’re taking to fight these groups.

Each subcommittee, so each group will be targeted by a subcommittee of federal prosecutors, OCDF folks and law enforcement agents around the country. Those people have among them decades of experience in fighting these groups. They’ve prosecuted and put away probably hundreds of these members, and they are locked and ready to go. They’ve been working on interim progress over the course of the last two weeks.

The attorney general in his memo directed us to report back to him in 90 days, as to the status of the task force’s efforts against these five groups. So we anticipate those reports will be fulsome. They will include ways to target these groups that implicate not just law enforcement actions and prosecutions, but also in more sort of like totalistic, whole-of- government approach. And we anticipate that those recommendations will be implemented for the rest of the administration.

So in addition to what DOJ is doing on its own, and that’s this task force that the attorney general announced, we’re also actively partnering with our interagency partners throughout the federal government to fight transnational organized crime. There’s this entity called the TMWG, the Threatened Mitigation Working Group. As we go on today, you’ll hear about 19 other acronyms from me. I may not remember to define them all, but anyway, what will the government be without 19 acronyms in a 30-minute speech?

The TMWG is comprised of DOJ, State, ODNI, DOD, Treasury, and DHS. They are our law enforcement partners, our diplomatic partners, our military partners. And this is the crux of our whole-of-government approach to fighting transnational organized crime.

DOJ is actively involved in the steering committee for TMWG. We are working with our interagency partners to come up with plans as to how best to implement the president’s executive order from February of last year. We meet very regularly. It’s bringing to bear the full resources of the federal government. That’s financial when it comes to OFAC and FinCEN. It’s diplomatic when it comes to State. The global reach of the Defense Department and the Pentagon are implicated here also. INL State is very intimately involved and, of course, our agency partners at DHS, vis-à-vis the Coast Guard. And other agencies are very intimately involved as well.

So those are the broad strokes. That’s what DOJ is doing on its own, and that’s what DOJ is doing with its interagency partners. We anticipate ratcheting the fight up in the months and years to come. DOJ established this counter transnational organized crime directorate of which I am now the head of. I’m looking forward to diving in full steam ahead. And this is a priority for the administration. There’s sort of no ifs, ands, or buts about it. It comes from the top, it comes from the president. The attorney general is 100 percent committed to this effort and DOJ is committed to fighting transnational organized crime.

James Dunlop: And obviously, it doesn’t spring from the whole cloth. I mean, the prior administration had a SeaTac strategy. The Department of Justice has long been involved in the fight. And so is it a sort of a reorganization of priorities and tools within the department? And can you comment on kind of which tools you think will provide the uplift for DOJ in the fight? Compared especially to the Treasury tools that we talked about earlier.

Patrick Hovakimian: Yes. I think it’s not so much a reorganization as it is just sort of a rejiggering of priorities. We’re saying, here are five groups. They have been designated as top priorities for various reasons. For their global reach, in the case of Hezbollah, for being particularly violent, for being, you know, for lack of a better term on the upswing and kind of on the ascent, and we want to stop it before they get up there. So various reasons these groups have been designated priorities.

Now we’re also in a great position to fight them. We have DEA and FBI engaged actively on this. We have our law enforcement partners actively engaged. And these groups that have been designated as priorities are going to be focused on by teams of prosecutors around the country. And that’s really the innovation to the AG’s taskforce. I think, Jim, is the level of coordination.

Because right now, like let’s say you’re in USA in LA and you have a Hezbollah case, and you’re in USA in Brooklyn and you have a Hezbollah case. Chances are you might know one another because you go to the same conferences. You go to, you know, the same meetings. You might be on a list serve or something. But what this does — this task force — is it formalizes the commitment to working across offices even within DOJ, looping in all of our law enforcement agencies, DEA, FBI, and others, and having really a true subcommittee that — you know, it’s not like we sit around a table and have plaques and everyone, you know, we take roll and it’s Robert’s rules of order, but at the same time it is pretty formal. It’s like we’re saying, “Here is our team that is dedicated to fighting this one group.” And that’s

really the innovation I think is it draws upon the different parts of the government and also the different parts of DOJ and puts everyone at the table together.

James Dunlop: What about statutory tools or novel or unique uses or just increased uses of criminal legislation that’s available such as the Kingpin statute, such as Section 315 of the Patriot Act?

Patrick Hovakimian: Yeah, those are powerful tools that are available to US law enforcement. We’ve used them in the past. As has been publicly reported, in 2015, the Kingpin statute was used to seize a very nice hotel on the west coast of Mexico that was tied up with one of these cartels. I anticipate we will continue to use statutes like that. I anticipate that, you know, without getting into anything that’s law enforcement sensitive in any meaningful way, I anticipate potentially an uptick or an increase in using these statutes as leverage as part of our holistic fight against TCOs.

James Dunlop: And we’ll get into a little of this, I think, as we talk further about whether there are areas in which, for example, we can improve our inlets with certain countries in the region and whether we can talk about some specific designations or targeting of actual government officials in ways that we haven’t done before, because that’s a sensitive area and where the threshold is for that. But at this point, one question I have in terms of the designations that Justice has made. A lot of cartels in Hezbollah. How much of the fight does Justice see as domestic? Meaning, taking place by the department in the US as opposed to coordinating within the region and with other regional governments.

Patrick Hovakimian: It’s hard to put a number on it, Jim, but I would say, it’s a little bit of Column A and a little bit of Column B. I mean, things that happen overseas affect us here in the US and things that happen here on the streets.

I mean, I used to be a prosecutor in San Diego. We have a terrible gang problem in Northern San Diego County. And these people are pushing drugs that the cartels are importing through the Tijuana, San Diego corridor, and it’s causing real problems. And it’s a cycle. You know, things that happen domestically in the US empower the cartels, as we all know. And the cartel of practices on the south side and elsewhere, you know, really directly contribute to some of the harms that we feel here in the US. So I anticipate the Department will continue to use the statutory tools available to us, RICO and otherwise, to go after things that, you know, we may just consider sort of a domestic street gangs, if you want to call them that.

But, you know, at the same time, having been a prosecutor and having helped build cases from the inside out, all of this is connected. It’s all connected. There’s people who, you know, they never leave their block in LA who are connected and tied up with show callers on the south side. All of this is tied together.

And we have powerful law enforcement tools that are at our disposal to fight it. That’s part of the message here. Part of the message candidly is this government cares about this issue. This government, under the direction of the president and the attorney general, are going after transnational criminal organizations, whether they’re operating here or across the border. This is a priority for the administration, and DOJ is at the forefront of it.

James Dunlop: Thank you.

Well, on our theme of this panel of really drilling down into the tool kit and seeing whether it’s adequate and where the gaps might be, I want to turn to Clay Fuller because I know you’ve done a lot of analysis, Clay, of transnational criminal organizations. The sort of authoritarian aspect that they take on in some countries like Venezuela and sanctions and other tools, and essentially a GAP analysis. Do you want to comment on sort of the state of play, the adequacy of what you’ve heard today from Secretary Billingslea and from Hovakimian and generally in this fight?

Clay R. Fuller: Sure. Well, thank you. Thank you very much for having me. I just wanted to give a premise that I don’t come from a policy background or a law enforcement background. I come from more of an academic background, so I’m going to take three minutes to give you a big-picture overview of what’s going on and how I see it.

First, I became an academic because I don’t like authority that much. This is a big surprise, but I don’t like anarchy either because anarchy is another type of dictatorship. So I spent about 10 years studying modern authoritarian governance around the world. So it’s 21st- century ways of maintaining monopolies on political control within governments in the internet and post–Cold War era.

And so what I see when I look around with the trends of that is that in the post–Cold War era, we’ve integrated with authoritarian countries all around the world with our markets, with the internet, throughout everything. And this has had great positive effects for a lot of people all around the world. And it’s brought a lot of people up out of poverty, has made a lot of people a lot of wealth, and created a lot of development out there.

But what’s happened in authoritarian regimes around the world during that is that they’ve captured this wealth and they’ve used it to create things like totalitarian and surveillance states. They’re building missile systems. They’re building nuclear weapons. They’re building things to threaten us in the West and in the United States.

And so, this has created, I think, the necessary actions that the US law enforcement and the government has taken and sanctions. I think we’re doing the right thing by pushing back on Venezuela, by pushing back on China, by pushing back on Russia, by pushing back on Iran, by pushing back on North Korea. We’re taking the right actions. But what’s happened is if you look at this development in the authoritarian countries around the world, in the post– Cold War era and think of it as a balloon, what the sanctions are doing is they’re squeezing that balloon. And it’s forcing that wealth and that capital to move in between authoritarian states around the world and move into the United States and Western countries that have strong rule of law protections, right?

So this creates a cover for transnational criminal organizations, terrorist organizations who — what we see now is that terrorist organizations are contracting with transnational criminal organizations, and criminal organizations are contracting with terrorist organizations for things that they don’t know how to do to each other. And what they’re doing is they’re hiding under the opacity and the lack of transparency in authoritarian governments and the corruption in authoritarian governments around the world in order to act with impunity around there while creating structures that then move that money in, move that value into the United States and around there.

So we’ve squeezed this balloon. We’ve forced them in to work together. This is why Venezuela is pushing money out through obscure Russian banks and creating the ironic sovereign cryptocurrencies that, you know, doesn’t really make much sense to me as an academic. But thinking of that, the money is being squeezed into the United States, I really like America First approach. I love America, but I see it a little bit differently where I think we need to be focusing on America, right, and focusing on catching where this money is coming in and exposing it and stopping it there. And I think this is done through, like we’ve heard before, beneficial ownership, transparency working on what FATF calls DNF, PBS, or designated nonfinancial sectors and businesses. It should be to be lawyers, realtors, accountants, corporate service providers. And we need to focus on how this money is coming in. Looking at it, taking a trade-based money laundering seriously, getting to transparency. Better here to know what’s going on at home.

So, this is how we lead the rest of the world, as Mr. Billingslea talked about inspiring other Central American countries and Mexico to create their own sanctions regimes that are able to go after these things and building the rule of law. But we need to recognize the sort of larger trend here.

So terrorists and transnational criminal organizations have an infinite supply of drugs, violence, and criminals, right? There’s an infinite supply out there. And the question is: How do you stop the supply of something that’s infinite? And the answer really is that you can’t, but you can mitigate it. And you mitigate it by stopping the ways in which they’re able to profit off of it. And so if you can stop and capture the ways that they profit off of it, then you can mitigate the threats that they pose.

James Dunlop: And so what particular solutions would you propose for stopping the ways that they profit off of it?

Clay R. Fuller: Well, specifically, since there’s 40 recommendations with FATF for AML, anti-money laundering, counter financing of terrorism, I believe the US is compliant on every single one of them. This is done through peer review of the 37 member countries of the organization. We’re compliant on all of them, but 22, 23, 24, and 28, which all have to do with beneficial ownership, transparency, and these lawyers, realtors, accountants, and corporate service providers or company formation agents. So if there is something we can do right there, bringing cryptocurrencies into it is a really good thing to do as well with the FATF recommendations because it’s used as a tool to sort of teach and share, you know, our best practices with the rest of the world because we are really good at what we do in the United States. Our law enforcement is great at what it does.

But the other one to bring into it is taking trade-based money laundering seriously. So trade- based money laundering is a sort of this enigmatized thing, where what Hezbollah and others do is they’ll obscure the value of trade-based goods by mis-invoicing, mislabeling, over- invoicing, under-invoicing, in order to transfer value around the world in ways that are largely undetectable. And this is just happening right underneath our noses. They’re buying up large volumes of electronics in China and then shipping them back to Mexico or Central America and then up through the border and then being sold to anonymously owned subsidiaries in the United States, formed in Delaware or somewhere. And then, you know, distributing those profits and using it to smuggle cigarettes from North Carolina up to New York and, you know, connecting into this whole area.

And we need to get a good handle. I think FATF needs to come up with a solid definition of what trade-based money laundering is and what the private sector should do about it.

And the other part of it is with the private sector, we’ve sort of unduly put the burden on banks, where I think they’re doing a great job at what they’re doing, but with the CDD rule from Treasury that we’ve talked about here, the customer due diligence, this sort of unfairly sort of singles out banks — which they should, you know, do this and they’re doing a great job with it. But criminals are smart, like we’ve talked about before. And these TCOs and the terrorist groups, they’re two steps ahead, and they’re ahead of the CDD rule. And what they’re doing is they’re moving through anonymous shell companies. They are buying real estate. They are hiring accountants to create these types of structures that are not discoverable right now.

James Dunlop: And this is just something I’ve wondered about, whether putting the onus on banks and other financial institutions to essentially be the roadblock is putting too much onus in one place and even having anticompetitive effects for those institutions because they’re being asked to do too much.

Now, you mentioned the private sector. Welby, I know obviously you’re here with us from Walmart today, and you’ve thought about this and you’ve thought about. And I was very pleased to hear, the secretary rather, say that the private sector was the first line of defense. And he didn’t really follow up on that, but I think, other than in the way you have it Mr. Fuller, but let’s talk about that.

How is the private sector the first line of defense? If so, how? And I think hearing Secretary Billingslea say that was the first time I’d heard it put that way. Usually, I hear it rather pejoratively in terms of the private sector’s interaction on this issue in the region. So what can you tell us?

Welby Leaman: Okay, I’ll start with a trick question. Is Walmart’s top competitor in Latin America Carrefour or SANCO Sun? But it’s neither. It’s transnational criminal organizations. Smuggling operation. For almost all of my comments, I’d like to just home in on Guatemala, just sort of that case, right? And think about the Chiapas, Guatemala border and the smuggling that’s going on across it. Or think about the La Línea corruption scandal in Guatemala that brought down the last Guatemalan president.

Well, it was a bribery scandal to get things from the ports through customs. Well, who is that? It’s an organization that is competing with us. We’re going to beat the informal economy. That’s what Walmart does. We have a formalizing role. And it’s not just us. The formal economy is an example of what those of you who, who talk on the Hill and understand sort of what sales trade agreements and so forth. It’s an example of the United States government, the United States private sector partnering together on trade and investment in order to raise standards, right? That’s what we do. And that formalizing role is, I think, the core of what Walmart and other companies like us do.

We heard also in the first panel that corruption — from Celina and from others — that corruption — and from Douglas — is the sort of facilitator of and the cover for all of the rest of this illicit activity within networks. And I would like to sort of focus, especially on what I think is a misperception about the private sector’s role in that, looking for example, again at Guatemala, a lot of work being done by the US government in an all-of-government sort of

way, but especially through state INL and others. In some ways, what you see is the presumption that the private sector has a role, sort of, on Prosperity Day in our now annual summits in which we talk about how to improve rule of law and thus weaken transnational criminal organizations in Guatemala and elsewhere. And then the public sector has a role on Security Day.

And first of all, there’s a problem there in that the private sector cannot adequately play its role on Prosperity Day unless it also has a role in Security Day. And second of all, the public sector needs the private sector in order to succeed in the creation of rule of law. Why is that? And it’s in part because rule of law, which is an antidote to this sort of cover and facilitation problem of corruption for transnational and criminal organization, is a Douglass North style three-part institution. So it includes enforcement authorities, but a man does not live by prosecution alone, in this context. We need also those who can contribute the informal cultural norms that Douglass North especially emphasized in his work on what builds an institution. And that is disproportionately done by the private sector because it is through both social and economic incentives that one develops cultural norms.

So, thinking specifically about that, I want to tell you a very sad story. The first part is something you probably already know, so I’m going to gloss over it really quickly. Walmart has in Guatemala 1,000 suppliers, many of them developed with USAID projects in which we worked closely with the USAID and with small and medium-sized enterprises in order to build this huge network. Which includes in the Wild West, so to speak. And Petén and so forth. Areas that are highly informal. And where that informality and corrupt culture facilitates these networks.

We also have 250 stores with over 13,000 employees. So that network is the first opportunity for many Guatemalans, whether in direct employment or in self-employment and then selling to Walmart or in the consumption space to participate in the formal economy and opt against this whole participation in illicit networks. That’s a story that you guys probably all know.

What you probably don’t know is that one of the heroes of the rule of law work in Guatemala and the former attorney general, Thelma Aldana, who is a celebrated figure the US government’s efforts to address these networks told Walmart, this is a direct quote, “Can I give you some unsolicited advice? Don’t buy from any Guatemalan companies. Forget that whole network.” Why? Because there’s a fundamental misunderstanding about the intersection between Security Day and Prosperity Day.

The prosecutors in Guatemala and the US government will fail at their efforts to build the institution, the three-part institution of rule of law until what Thelma Aldana said finally becomes more clearly an error in people’s minds. The reason she’s saying that it’s because she thinks that that network exposes us to serious legal risk because invariably, if you work with 1,000 companies, somewhere out there you’re going to work with some crooks. This goes back to your question.

I mean, I made a big circle to get back to you where you raised the question of do we put all the onus on the banks. And I think the solution is, in part, to understand what high-standard compliance looks like. It doesn’t look like perfection; it looks like cooperation.

And so, the reason that Aldana is wrong when she tells us to stop buying from Guatemalan companies is, of course, in part, because unless we buy from those Guatemalan companies,

the formalization role won’t expand. And ultimately, prosecutors just can’t prosecute enough people. So they need our role to compliment theirs.

But it’s also because of more than that. It’s also that it’s not just our jobs and our investments that make a difference. It is our participation in the act of building rule of law itself through high compliance standards and through cooperation with the government on cases that implicate us, in cases that implicate others.

And it’s in that context that one needs to understand the private sector as an ally in this effort, such that if you have a business like ours that has 1,000 suppliers and it turns out that there are five crooks among those 1,000, which is a pretty good batting average, then instead of doing what’s actually happening in Guatemala, which is going after all of the formal businesses, you instead recognize those formal businesses as the distributors of formalization, cooperate with them, help us to root out the bad apples, and continue pushing out a proper formalization to others.

James Dunlop: We’ve heard, I think, some pretty strong expressions today from Treasury and from Justice and about the private sector of each component’s role in the fight against transnational organized crime and in the Americas.

Ambassador Brownfield, you — you have the unique position of having represented the United States in three countries in the region and having had to deal with both the problems and the mishmash of agencies that have been talking with us today and the private sector in addressing the problem and watching how it gets addressed. And I’m wondering if you can give us your own GAP analysis of where this fight might be improved among the agencies. And maybe talk a little bit about the particular role of foreign policy in the region in improving America’s stand in this fight.

William Brownfield: By golly, I think I can. And in fact, I’d be delighted to do so.

By the way, Dr. Fuller noted that he brought you kind of the background of an academic. I bring you to the background of a West Texas farming family. And the cotton farmers of America want me to say the following, which by the way, I’ve been saying for about five years.

Ladies and gents, it is my contention that the United States government is currently quite well organized for dealing with two facets of transnational organized crime: terrorism, and counterterrorism, drugs, and counter-narcotics. I don’t say we’ve been successful in absolute terms. I say we are well organized. People know who’s in charge, what the process is, how things are decided, and who controls the assets and the resources.

In between or all around those two specific parts of the problem set is a nearly infinite number of other forms of transnational organized crime: migrant smuggling, trafficking in persons, illegal mining, illegal logging, firearms. You name it, it’s out there. Cyber, financial crime, wildlife traffic, and for god’s sake, and another 600 or so.

My view is we have made progress. It is incremental. It is small steps. We are better today than we started when we discovered transnational organized crime about five or six years ago. But we still need to come to grips with a basic structure that has four core elements. A strategy, not a detailed point by point, “This is the route to success strategy,” but something

that allows everyone involved to say, “Yes, our equities are incorporated in this and we can work with our colleagues on the basis of this strategy.”

Second, we need authorities. There are plenty of authorities out there. You just heard a good number of them from the position of the Department of Justice. In a sense, what we need to do is have an opportunity, collectively, to express our views to the maker of authorities in the United States government. That is the Article One branch of government, the United States Congress, in terms of what authorities does the executive branch as a whole believe it needs to address this larger issue of transnational organized crime.

Third is organization. Now, it could be something as simple as counter-narcotics. A single issue agency that’s in charge. It’s called DEA. Wouldn’t work at all in this context, but that’s the ultimate of simplicity. It could be something almost as simple counterterrorism, where if it’s a domestic operation it’s FBI, if it’s outside of the United States of America is the Department of Defense. That’s simple. Everyone can basically understand that. It also will not work for transnational organized crime. What we need is a structure that everyone understands and agrees to and is implemented by an executive order, by the head of the Article Two branch of government, the president of the United States.

And fourth and finally, we need resources clearly directed at this problem. They’re out there, by the way. It is not that we are resource short, but in many ways, the resources are stovepiped and, of course, agencies are reluctant — I know, I ran one for seven years — to share their resources on demand with others without understanding what their role is. So at the end of the day, I would suggest it is strategy, authorities, organization, resources.

Now, where are we right now? Having given you that blistery and somewhat negative in terms of suggesting that we haven’t quite gotten to cross the goal line yet, I will say, I think we’re far better positioned now than we were when we started down this road, which I would say it was around 2011, 2012 when the first of the executive orders came out.

And in fact, I think this administration first came out guns blazing with one of the very first executive orders on the issue of transnational organized crime. The good news is everyone paid attention to the fact that this is a priority. The bad news is the early executive orders tend to be those that have not enjoyed the maximum amount of thinking, preparation, and so forth. And in fact, those who have to implement them are doing a certain amount of catch-up as they work their way through.

But I’ll throw out some examples of things that work well. Extradition works exceptionally well. May I tell you why? Because it scares to — I’m a former diplomat. It scares the bejesus out of those who are subject to extradition. In the glorious days of the great cartels in Colombia in the 1990s, the favorite expression of the Pablo Escobars of the world were [foreign language] Better to lie in a tomb in Colombia than in a jail cell in the United States. That scares them. That actually has them concerned.

Extradition treaties. Actually, we don’t need to worry so much about that. Every MLA, in my humble opinion, this is INL speaking, I know I’m in your territory, but every MLA that is out there has language in it that to all intents and purposes gives you a de facto extradition treaty if not a judicial extradition treaty.

We’ve got the negatives that we can pound them with. And that’s what sanctions are all about, ladies and gentlemen, and they can hurt. I predict that in the course of maybe this decade, if not, certainly by the next decade, sanctions are going to bring down a criminal government in our hemisphere. A government that I say is not just a narco-state, is a mafia state because it goes well beyond drugs. And I’m referring to the Bolivarian Republic of Venezuela.

There are positive weapons that we have at our disposition as well, however, and let us not forget them. The international Narcotics Control and Law Enforcement Act appropriates somewhere between $1.2 and $1.5 billion a year. This is positive stuff that we can lay out to foreign governments, police, prosecutors, courts, prison systems and say, “You get these benefits if, in fact, you will perform these particular actions.” This actually helps the criminal justice community and the law enforcement community in order to have something other than a hammer to beat governments over the head with in order to do the right thing.

At the end of the day, I start negative. I still think we’ve got some work to do, but I believe we’re in far better position now than we were, let’s say when I came into my INL job in January of 2011.

James Dunlop: And so you talked about some of the tools, and you’ve talked about the need for strategy. And you talked about the things that we can do with governments in the region other than to beat them over the head and to take and bring to their attention. Whose job is that? Because as I read the executive order, it’s very enforcement-focused and not really focused on making it or elevating it as a matter of foreign policy. And I wonder if you think that it’s been at a sufficient level within the State Department as a matter of foreign policy.

William Brownfield: Yeah. I’m going to give you an answer that may surprise you. Certainly will surprise the gentleman in the middle. And for US State Department guys, and I see you. I know you’re here. Stand by to gasp. My own view is — and it’s always has been my view — that combating transnational organized crime, the lead responsibility goes to the law enforcement and criminal justice community.

Man: Sorry, I couldn’t hear that.

William Brownfield: The C in talk is the same as the C criminal justice. Now, at the end of the day, they are the ones who are saying, “This is our objective in terms of what we are trying to accomplish.” It must obviously work in tandem with our foreign policy and foreign relations objectives because it is foreign. It is international. It is outside of the United States of America. It must tie into our financial system and those who manage our financial systems. Not to mention our economic, commercial, and trade systems or believe it or not, our Health and Human Services systems, who are responsible in a sense for how we manage those drugs that are illicit or, in fact, those drugs that have been abused in the United States of America.

But you can’t have everyone running the policy and setting the priorities. Which is why under Bill Brownfield’s dream formula, where we have worked our way through the first strategy and then through authorities, we get to organization, we’re able to come up with a structure that, one, allows the criminal justice community to say, “This is our targeted or our objective,” and then the other communities are able to say, “This is where it must fit into how we do things.”

And what is the way to ensure, ladies and gentlemen, that it is done correctly, at least on a country by country basis? It is this. In every country in the world with the exception, I think, of maybe two or three, there is a little tiny United States government. It is located inside the United States Embassy. And in that embassy is a little mini-president of the United States. You can recognize him or her because he or she has received a letter from the president of the United States which says, “Congrats, you’re my ambassador. Every element of the United States government in your country reports to you. Don’t screw it up. Have a nice day. Love, The President.”

So to a very considerable extent, there is a human, at least in each individual country who is in a position to say, “We’ll do this. We won’t do that.” Now, at the end of the day, if that human exceeds his or her authorities, he or she will undoubtedly hear from Washington and a variety of headquarters. But this, from my perspective, is the basis by which we are relatively confident that things won’t go wildly off track unless, of course, and God knows this almost never happens, Dr. Fitzpatrick, unless we have a moron as ambassador, and if that happens, you know, all bets are off.

James Dunlop: Well, I think we should give our associate deputy attorney general a chance to react and also maybe follow up.

William Brownfield: What can he complain about?

Patrick Hovakimian: Well, that’s quite something.

James Dunlop: It occurs to me you may think some of this is already underway.

Patrick Hovakimian: I think some of it is already underway. And if I may have the chance now to say something that might, I don’t know, it might surprise our diplomatic colleagues onstage and the audience.

I do view the issue, you know, as primarily an enforcement issue. We have to at some level dismantle these networks, these organizations, and take them down. But it is incredibly important and, strictly speaking, necessary. I really firmly believe that it is necessary to bring all tools available to us to this fight. And a critical part of that is diplomacy. It is political will. It’s engendering a climate in countries where these folks operate that says, “This isn’t okay,” that we’re going to stand up to it.

Corruption, someone mentioned. You know, I was a corruption prosecutor before taking on these manager roles. You know, I prosecuted corruption all over Southeast Asia, things connected to Thailand, the Philippines, the Western Pacific. It is the number one cause of all of this. When you have government officials who say, “I have an office, I’m going to look the other way.” Or when they say, “I’m going to take your money and I’m going to do something for you and I’m going to enable all this to go on.” When that happens, the war is already lost.

And I’m telling you, as a prosecutor, as someone who’s done these investigations and cases for years, you can’t just fight that with law enforcement. You just can’t. That might be a shocking statement to some of our diplomatic friends, but you just can’t. You know, that’s why the Department of Justice has OPD at — the overseas prosecutorial development crew

that goes over to different countries and helps train prosecutors and helps train judges, sometimes, in other countries.

That’s why we have delegations come to the United States. I’m going to go speak to a delegation of Mexican judges up in New York City next month. I was down in Mexico visiting with our colleagues down there at POST and also some of our counterparts in the Mexican government about rule of law issues. And INL was intimately involved, and State was nothing but hospitable to us. And they’ve been a great partner in the whole-of- government approach.

But it is so critical to bring to bear every tool and every resource we have to this fight. Because if what we do is just indict a bunch of people based on a wire we have up here in the US and they’re indicted and they are living out in wherever and we never see them, what good is that? It’s no good. And if we indict a bunch of people, get them here somehow through an extradition process that does actually work pretty well, and then imprison those people, but we haven’t worked with State, we haven’t worked with our other partners, we haven’t worked with local governments to ensure that an environment exists where new organizations don’t just pop up immediately. Look, I’m not naive, they’ll pop up, potentially, at some point, but we can slow it down. We can do things. If we haven’t built that environment, that geopolitical environment, well, then what good is having a bunch of people indicted and imprisoned in the United States?

James Dunlop: Yes. Yeah. I think overseas prosecution is difficult. MLATs are great tools, but they move at the speed of the host country, right? So that’s very difficult. Mutual Legal Assistance Treaties.

And you know, in the corruption space, which is space I work in quite a bit, it’s very difficult for the United States to always establish its authority, its jurisdiction, and then you’ll end up in diplomatic issues and issues of foreign relations when you start to talk about turning those tools against leaders of foreign governments.

But when you have a state such as the state Ambassador Brownfield described in Venezuela, is there a threshold over which you start to look at those tools? You start to look at Section 315 of the Patriot Act, which allows turning what we think of as FCPA, I mean, money- laundering offenses into prosecutable corruption offenses.

And what about seizure authority? It’s one thing to block — and Treasury. And we’ve heard today great discussion of Treasury’s ability to block and ability to identify networks. It’s another thing to take the assets and deprive them, and that’s really a Justice Department function. How can we better use that? Or should we be using it more? Or do you plan to?

Patrick Hovakimian: So as you mentioned, Section 315 of the Patriot Act adds to the specified unlawful activity under the money-laundering statutes, public corruption offenses, including those taking place overseas, broadly speaking. It’s a valuable tool. It’s a powerful statute. It’s something that the department has used in the past. It’s something that, you know, our past use will continue. We’ve used the Kingpin designation. We’ve worked with OFAC. We’ve worked with FinCEN. And I anticipate these trends as part of the government’s overall emphasis on taking down these networks to continue.

James Dunlop: Great. I think we have time for a few questions from the audience. Yes.

Q: Thank you very much. Mike JG, George Mason University. The light motif of this discussion has been that corruption is really the center of gravity for terrorism, drug trafficking, etc. And the point made by the representative from wallboard [inaudible] the solution which is rule of law. And in particular, in Guatemala, Thelma Aldana’s attorney general. But she’s been supported by the commission to combat impunity in Guatemala, CICIG. The president when CICIG and Thelma Aldana went after his corruption, that got him into office, like the Lava Jato scandal in Brazil is now trying to dismantle CICIG won’t allow Ivan Velasquez, the head of CICIG, to return to run the organization.

I have not heard the Trump administration condemn that. And I think you made the point. We need to stand up to corruption and condemn it. Can we expect to hear the Trump administration side with the rule of law and CICIG and Guatemala?

Patrick Hovakimian: Well, I suppose that that was directed toward me. I’m the only Trump administration that’s up here.

William Brownfield: I’m former.

Patrick Hovakimian: You’re former? By all means, sir. You want to take that one?

Clay R. Fuller: I’m an academic.

Patrick Hovakimian: Look, the attitude and the pace is set at the very top. The president is 100 percent committed to enforcing the law as it’s written and upholding the rule of law. We have an attorney general who has been a champion for the rule of law his entire career, and we anticipate that the Department of Justice will continue in that tradition.

William Brownfield: If I could add 30 seconds to this. I ran INL in the State Department for seven years. And INL was the recipient of the earmarked funding from the United States Congress every year to support CICIG. I can tell you that the current president of Guatemala is not the first president of Guatemala to turn against CICIG. I had conversations with his two predecessors at various times over the last eight years, each time saying, you know, “You may like it, you may dislike it. If the money has to be spent, it is going to be spent on supporting CICIG.” Two presidents basically accepted that. They held their breath and proceeded. It’s a work in progress in terms of this one.

James Dunlop: You and I sat with Thelma Adana in American society. I know you have some thoughts on this.

Welby Leaman: Yeah. I mean, you know, again, to go back to this idea of Douglass North and the building of an institution, right? I mean, the United States government has a lot of experience with building institutions inadequately in Latin America. So let’s say the effort to build intellectual property rights in Latin America. We brought in bulldozers, spent all of our money on and full-on through embassies on enforcement. In fact, sometimes book countries on the special 301 watch list because they weren’t putting all their money, all their IPR budget into enforcement, and it didn’t work.

Then we started building out the rest of the institution of intellectual property, including taking seriously that you have to invest in cultural norms. And then it started grabbing hold because people had incentives.

The work of INL has been entirely focused on enforcement as its responsibility, but that shows why INL is not adequate. The ministerial public has been entirely focused on prosecutors, and since CICIG sees itself as a prosecutorial agency alone, that’s why they’re not adequate.

We believe very strongly in the role of prosecution and thus the role of all three of those. But we also think that they can, through broader governmental authorities, they can convene the other participants in the building of rule of law. We’ve talked with Ivan Velasquez about that when he was commissioner, and he pointed out that, “Look, I’ve got a lot of big fish to fry. We have our hands full.” So whoever it might be within the government needs to convene public and private together and identify the role that the private sector can play.

I’ll use one tiny little example. Tax evasion is rampant in a lot of Latin America, and it’s part and parcel of their corrupt culture. The CEO of Walmart Latin America is Chilean and looked at this fundamental problem we have in Guatemala where some of our suppliers may not pay their taxes and then ultimately, even potentially, criminal exposure comes back on us, which discourages us from our formalizing role, which then feeds the vicious cycle, and said, “Well, why don’t they just do a higher withholding tax because people pay if they have their tax withheld?” That’s the sort of practical, best practice understanding that the private sector can contribute in a way that honestly, the government officials involved seem to be doing an awful lot of work without something nearly as powerful as what simply having the private sector point out how withholding works in Chile could do

James Dunlop: Other questions. Did you do have a question? Yes.

Q: Good afternoon, gentlemen. So I like to present this. I want to say something shocking for a man in uniform. So it appears to me that in any conflict, there are only two ways that you succeed. One is that you achieve overwhelming force, whether that’s by developing some of the issues that the presenter on the left spoke about, you know, or you negotiate. One is unlikely, and the other one is untenable.

So I went to a meeting to talk about fentanyl recently, a couple months back, and I asked one small question: “If we solved the problem of fentanyl today, what will we be discussing tomorrow? Which drug?” So it seems to me then that we seem to have a conceptual challenge with the way that we are attacking this problem. And that is that we always seem to [inaudible] again.

Do you think it’s time to rebalance the way we treat the problem and maybe look at it from the social end? Because at the end of the day, what we really have is a demand and supply problem. A demand for feeling good in whatever way people choose, and a supply that will follow that demand regardless of how it has to achieve it at the end of the day.

James Dunlop: Clay, do you have some thoughts on that or —

Clay R. Fuller: Well, I don’t really dive into domestic policy too much, but you’re — you’re absolutely correct. And what I say is that these transnational criminal organizations

and terrorist organizations, they have an unlimited supply. Drugs, you know, are made plants that you can make as much. These cartels, they create everything they possibly can and just throw it at the border, and they don’t care how much we seize. They don’t care how much we stop. As long as a little bit gets through, as long as they get that profit back, they get even higher profits.

So yeah, there has to be some sort of different — I think the focus on strategy is important here. Where you change the strategy. I don’t know about the social aspect of it because that’s a different debate that every country has to have themselves within their own governments and among their own societies. But from a strategy perspective, thinking about it differently from the supply and demand side of it, and especially the profit side of it because in every supply and demand chain there’s a profit cycle also. So I tend to focus on that because that’s easier to look at and track and grasp in a conceptual framework.

William Brownfield: If I could add a little bit. I first worked in the bureau I ran for a while, INL in 1993. First time I engaged in the international narcotics issue. So I’ve been on the issue off and on for 25 years. And I offer two lessons that I learned over those 25 years.

One is chronological. In the case of drugs, it takes us decades — it takes societies and communities decades to get into these crises, and it’s going to take decades to get out of them. You can’t have a crisis that’s 40 years in the making and expect to get out of it in a year or two.

The second one is what I guess I will call balance. Should we focus on demand as much as on supply? Of course we should. We will never solve a problem of this nature without addressing both aspects. And I wouldn’t just say both aspects. You’ve got transit in between, which is an issue. And then in terms of supply, you’ve got cultivation and then the laboratories. And then movement to ports of departure. And in terms of demand, you have education and treatment and rehabilitation, as well as law enforcement at the final marketplace.

And at the end of the day, history teaches me — I may be stupid, but what it teaches me is your strategy must address all aspects. Now, you can change your strategy by putting more focus, at times, on different aspects of the problem. But if you treat the drug abuse problem as a chain of a bunch of links and you remove one of the links completely, what happens? That chain falls down. So to some extent, if you’re going to be successful over time, you have to address all aspects.

Is the gentleman correct that at times we have overfocused on supply, which is heavily law enforcement, and under-focused on demand? Undoubtedly. Do we, therefore, want to focus exclusively on demand and forget supply? I think that would be as bad a mistake as perhaps the first mistake dating back to the 1970s.

I’m done now. Thank you for letting me vent.

James Dunlop: Thank you. Other questions? Roger.

Roger F. Noriega: Thanks. A very specific question on Venezuela on the earlier very excellent panel. I’ve been stalking Bill Brownfield and saw him in an earlier panel, where he was wearing his hat as an uncompensated fellow at the —

William Brownfield: Had I mentioned I’m uncompensated? I’m a senior fellow and senior adviser at CSI, uncompensated.

Roger F. Noriega: CSI, yes. And I asked the question about in order to sort of paint the Venezuelan regime as a criminal enterprise. The significance of indicting some of these people. You know, US attorney, Eastern District of New York, Southern District of New York, Southern District of Florida, Houston, all have substantial time and evidence, witnesses, everything at their disposal to make these indictments. And I asked Ambassador Brownfield about, you know, when a decision should be made to indict these people and pull the trigger on them and expose the fact that leaders of the regime are directly involved in narco-trafficking and expose all of the evidence associated with the illegal networks. Your answer then was, you know, these decisions should be in the hands of the US attorney.

William Brownfield: Did you hear that?

Roger F. Noriega: And reading between the lines, well actually you explicitly said, and not something that interagency process should interfere with. Is the interagency process interfering with the decision of US attorneys and making these decisions to indict people? And if not, at what point does it make sense from a diplomatic standpoint, and making this case to the rest of the world about the nature of this regime, does it make sense for people to pull the trigger and indict some of these individuals?

Patrick Hovakimian: And I did seizures onto the back end of that because I think there’s withholding on seizures as well.

So, whether and when to indict is a decision that the United States makes in its sovereign capacity. And that’s not a light thing. You know, whether it’s indicting a drug dealer on a street corner or, you know, a local public official accused of corruption.

You know, I have a practice. When I prepare my indictments for filing and return, the people who help us kind of type things out and format, they always write, you know, it’s like the United States of America, comma, Plaintiff V, so and so, comma, Defendant, period. I always delete “plaintiff,” always. The United States isn’t a plaintiff. The United States in its sovereign capacity is charging an individual or a group of people with a crime.

And you know, for those of us who have been and are prosecutors, it’s one of the most momentous decisions you make is when you recommend, “I’m going to charge. I’m going to bring to bear the power of the United States and our criminal regime against this person or this group of people.”

So, look, from the perspective of the Department of Justice, it is exclusively the province of the Department of Justice to decide whether and when to indict. It just is.

Now, can that decision and can policy factors and other considerations be informed by dialogue with folks who are our colleagues in USG who are better equipped than we are to tell us things about environments in which we operate? How’s that for a government answer? Yes. I think the answer is yes.

I think, you know, I didn’t do a single thing when I was working cases involving East Asia in the Western Pacific oversee. I didn’t do a single thing without talking to OIA, which is the Office of International Affairs within DOJ, and then without talking to our friends at the State Department. And that includes folks in the embassy who are out there. You know, every time I’ve needed, you know, help extraditing someone, State has been there. It’s been wonderful.

So again, we have the best government in the world, bar none. We have all kinds of resources, all kinds of talented individuals and people who bring expertise that no prosecutor could ever wish to have. It behooves all of us to pull the levers of government when we make decisions. I really believe that, uh, but at the end of the day, you know, dialogue is one thing and action is another. And when it comes to whether and when to indict, that’s the Department of Justice, law enforcement decision.

James Dunlop: Other questions?

Well, I want to thank the American Enterprise Institute on behalf of the Federalist Society for hosting us in this magnificent facility today. I want to thank all of you for coming, and I want to thank our panelists for enlightening us today, both on this panel and our earlier panel. Thank you so very much. And this day’s proceedings are concluded. Thank you.

Man: Thank you.