October 22, 2024 • 59 mins
The ongoing fentanyl crisis in America shows few signs of abating. Roughly 200 people per day, more than 75,000 Americans per year, lose their lives due to fentanyl use. But how do we stem the tide? Looking through a financial and national security lens to follow the money, Coercive Capital host Elaine Dezenski and Ray Donovan, a 28-year veteran of the DEA, serving as its Head of Operations, and a leading voice on the matter take a deep dive on the Chinese underground money laundering networks and manufacturers of precursor chemicals that ensure that criminal networks get paid and that chemicals flow to the Mexican cartels producing and distributing fentanyl in the United States.
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Speaker 1 (00:00):
Today's podcast is supported by Winston and Strong LLP. Winston
and Strong, a trusted legal advisor and advocate for clients
across virtually every industry. Coercive Capital is proudly supported by Hummingbird.
Hummingbird is a modern compliance platform designed to make financial
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(00:23):
criminals are sophisticated, savvy, and agile, meaning the tools used
to fight them should be too. Learn Moore at hummingbird
dot Co. Welcome to Coercive Capital. I'm Elaine Dozenski. There
(00:46):
is an opioid crisis.
Speaker 2 (00:47):
In this country.
Speaker 1 (00:48):
No one can deny this. The Center on Disease Control
estimates that in twenty twenty three, about two hundred Americans
died every day from opioid overdoses, more than seventy five
thousand Americans per year. It is the leading cause of
death for Americans between the ages of eighteen and forty five.
These are staggering statistics, and this is a trend that
(01:09):
all of us should do our part in helping to reverse.
One of the ways we might want to think about
combating this epidemic is to examine it through an economic
and financial lens. According to former Attorney General Bill Barr,
the opioid crisis, fueled mostly by fentanyl, costs the United
States nearly one point five trillion dollars in twenty twenty.
That's the equivalent of seven percent of US gross domestic product.
(01:33):
But there's another, perhaps worse aspect to this. Fentanyl, the
leading synthetic opioid, is fueled by Chinese underground money laundering
networks and Chinese manufacturers of precursor chemicals. Together with the
Mexican cartels responsible for making pills and distributing them. The
US is facing a massive economic security challenge trying to
(01:55):
address these illicit networks. In April twenty twenty four, report
from the House Select Committee on the Chinese Communist Party
examined how the People's Republic of China directly subsidizes the
exports of ninety seven percent of fentanyl precursors and deadly
fentanyl analogs and other synthetic narcotics chemicals that are illegal
(02:17):
under its own laws. Former Attorney General Barr has also
noted that without China's part, there would be no fentanyl crisis,
and yet China has done little to stop the flow.
There is no one better to examine the financing and
security issues related to fentanyl and the opioid crisis than
(02:38):
Ray Donovan, one of America's foremost experts on the matter
and a leading voice and helping us understand and expose
the vast money laundering networks that support the fentanyl trade.
Ray is a twenty eight year veteran of the DEA,
serving as its head of Operations and a Special Agent
in charge for the DEA's New York Division, responsible for
(03:01):
many of the highest level global narcotics, money laundering and
narco terrorism cases. He also ran the interagency team that
captured not once but twice and brought to justice the
notorious leader of the Sinaloa cartel, Chaffo Guzman. I recently
spoke with Ray in an effort to better understand more
(03:22):
about the financial and national security factors related to fentanyl
and what might be done about them. Ray, Welcome to
the show. I'm so honored to have you with us
on Coerse of Capital on the Illicid Edge Network. Thank
you for being here today to talk to us about
the fentyl challenge that we're facing.
Speaker 3 (03:41):
Thank you for having me, Alane.
Speaker 1 (03:43):
It's my pleasure thank you so much. I want to
jump right into the angle for our conversation, which is
really digging into the money laundering networks that fuel this crisis.
And it's something I and others have written about as
a money laundering crisis fueling a drug crisis, and one
that has taken the lives of about two hundred and
(04:05):
fifty thousand Americans since twenty eighteen. It's incredible the impact
that this epidemic, this crisis has had on the US
and why it's a national and economic security challenge for US.
But maybe to jump right into the money laundering analysis,
you know, we're not talking about the old regime of
(04:29):
cartel controlled bags of cash showing up at the border,
you know, as we might have seen with the heroin epidemic.
But how do we get to where we are now,
which is a really sophisticated money laundering operation driven by
the Chinese. When did you start to kind of see
this change in terms of how cash, illicit cash is
(04:52):
moving through the system.
Speaker 2 (04:56):
So let me give you a foundation very quickly of
what that looks like. So historically, when you look at
the illicit narcotics and cocaine, let's just take cocaine as
an example. Primarily, the methodology of laundering or cleaning that
money back to source countries like Columbia would be through
bulk cash smuggling or black market pace to exchange those
(05:20):
who were the two methodologies with synthetics, which is methamphetamine
or fentanyl. We started seeing other technologies, other methodologies deployed
specifically by the Chinese to move money a lot faster.
And as though technologies advanced, like digital currencies, we started
(05:41):
seeing digital currency ATMs popping up, a bitcoin e ATMs
popping up all.
Speaker 3 (05:48):
Over South America.
Speaker 2 (05:49):
We started seeing Chinese organized criminal groups not only using
financial institutions or trade based money laundering, but also using
a whole host of different methas to move money a
lot faster than historically how we would see that. That
started around twenty thirteen twenty fourteen is when we started
seeing precursor chemicals for fentanyl come into the United States
(06:13):
the Southwest border and then smuggled into Mexico converted into fentanyl,
and at the time it was being added to heroin
and then smuggled back north. That's when we started seeing
Chinese organized crime start to really take a hold in
regards to the pentomyl crisis, but prior to that they
were already involved with methamfetamine production throughout Mexico. Twenty sixteen
(06:37):
was a key year for US, though we see it
as a convergent year because at the time you had
Mexican cartels that were pressing fake fentanyl pills.
Speaker 3 (06:48):
We saw the dark web, social media, We saw the.
Speaker 2 (06:52):
Populations that historically used heroin and historically used diverted pharmaceuticals
now to converge.
Speaker 3 (07:00):
So it just exploded.
Speaker 2 (07:01):
We started seeing a lot more smuggling of fentanyl directly
into the United States around that time period.
Speaker 1 (07:08):
Yeah, it's like a perfect illicit storm that you're talking about.
Maybe we could dig a little bit more into this
money laundering triangle that is fueled through these Chinese money
laundering networks, their ability to operate globally, the convergence of
that network with the needs of Mexican cartels, and of
(07:32):
course the growing demand for fentanyl in the US. Can
you walk us through exactly how this triangular trade is happening.
Speaker 2 (07:44):
So the Chinese became experts in what we call mirrors
or in Mexico espos, and really what that's indicative of
is the speed by which money is exchanged and transferred
back to the cartel. And I'll give you an example.
If drug cartel smuggled their drugs across the border and
(08:04):
it's distributed in an area, it's then picked up and aggregated,
and then it would be be passed off to a
US cartel or money broker's point of contact. As soon
as that money is picked up and delivered to Chinese,
the Chinese side of that, the money would be released
in the paesos would be released in Mexico back to
(08:27):
the cartel. It was immediate, there was no drag or
wasting time. But it's really indicative of what black market
payso exchange where he is. So I think I have
to explain that a little bit so that the audience
understands what that looks like.
Speaker 3 (08:43):
So, the cartel number one goal is to.
Speaker 2 (08:45):
Make money, and more often not it's in US cash,
and their goal is to get that money back to
whether it's in Columbia, whether it's in Mexico, get it
back to their country. And so the fastest way to
do that historically has been through black market payso exchange.
And so what that means is you'll have a business
(09:07):
a money broker in Mexico. That money broker would then
go to a business person, Let's say a Mexican business
that is looking for US products and has a US exporterer,
and so they have to get US cash to that
export to get those goods. And so what they will
do is exchange paesos four dollars back to the drug
(09:28):
cartel four fee. And why does it work for them?
It works because they avoid taxes, they avoid tariffs in
some cases bank fees, and so they're really see and
also the exchange rates.
Speaker 3 (09:44):
So they're saving money by going through the.
Speaker 2 (09:47):
Black market and opposed to going from bank to bank, right,
and so they're getting their hands on US goods. So
often it would be a Mexican business or Columbian business
that is going to the money broker. The money brokers
really playing in middleman between a cartel and that business
in that country. Where the Chinese got so sophisticated is
(10:09):
that the Chinese were also the exporters and the importers.
So you'll have Chinese businesses in Mexico that are the
importers and Chinese businesses in China that are the manufacturers
and exporters. And so they were making money on both ends,
and they still are. And there's there's many methodologies that
(10:31):
they deployed. They could use the financial institutions that we
see more cash is still deployed as well, but trade
based money leadering it is by far the big biggest
method and the fastest, and it is the most lucrative
method for.
Speaker 3 (10:46):
Them to move money worldwide.
Speaker 2 (10:49):
And I'll give you an actual case example that I
had while I was a special agent in charge in
New York.
Speaker 3 (10:55):
We had a group that was moving phones.
Speaker 2 (10:59):
They would buy Apple phones, Android phones, and for example,
they would spend one hundred thousand dollars on the phone,
while at the time, all those phones back in China,
even though they were manufactured in China, were worth three
hundred percent of a markup on what they cost in
the United States.
Speaker 3 (11:18):
So even when the Chinese.
Speaker 2 (11:20):
Criminal groups were losing money, they were still making money
and it was very fast. Now phones were one thing, clothing,
you name it, cars, expensive wine, all American goods that
would be purchased with drug proceeds, put in a container
and shipped to China sold, recouped the investment and make
(11:40):
a profit on top of that. Well, then you would
have these Chinese businesses that exist both in Mexico and
China that would either wire the money or send goods,
and the good would be sold in Mexico. So when
you talk about the triangule, you're looking at United States, China,
and Mexico and a movement of money and good behind
(12:02):
behind the drug trade.
Speaker 1 (12:04):
Yeah, let's talk a little bit about the trade based
money laundering angle, because I think this is a particularly
challenging part of this problem. How do you how do
you think we should go after this trade based money
laundering risk? What is it that we need to be doing.
Is it better manifest information, is it more coordination, Uh
(12:29):
maybe with Mexico and Mexican ports. What what do you
think that looks like?
Speaker 2 (12:35):
So trade based money laundering is really challenging go after.
Obviously it's a lot easier for us with the BSA
to go after you know, criminal groups utilizing financial institutions.
But trade based money learning is just that there's not
very there isn't too much regulations. I mean, yes, we
(12:57):
may have to fill out a form if someone comes
in and spence thousand dollars in a specific store, but
you can come in with five thousand, three thousand and
constantly bye bye, bye bye, and you're basically washing money
relatively quickly. That is a challenge because we don't want
to slow down commerce, but at the same time, we
(13:18):
want to be able to identify and go after these
criminal networks.
Speaker 3 (13:22):
And I think there are some areas.
Speaker 2 (13:24):
Where we could focus in on that will really kind
of pin down some of these groups that are at
scale utilizing our economy to launder billions of dollars across
the world. And that's one of those things that came
up in the hearing that we had back in April
this year to talk about ways that we can go
(13:44):
forward against these criminal elements that are utilizing our system
to their advantage.
Speaker 1 (13:52):
Yeah. Absolutely, let's go back as well to the Fenel
money laundering triangle that you've laid out. One of the
challenges is that the dollars don't leave the US, the
pesos don't leave Mexico, the R and B don't leave China.
There's a mirrored network. It's very sophisticated. It's working globally
(14:16):
to to to facilitate a lot of criminal activity, not
just fentanyl, but it also presents a particular challenge for
financial institutions. First, and foremost, I think because it's difficult
to be able to pinpoint the particular money laundering risks
(14:37):
as cash moves moves into the system, but also because
increasingly these transactions, as I understand it, are happening outside
of the traditional financial system. Could you help us understand
the migration of that thread and why this is such
a challenge for banks.
Speaker 3 (14:57):
It does still happen throughout main banks.
Speaker 2 (15:00):
So I'll give you an example of just what happened
last week with the plea agreement of TD Bank uh
to the tune of three billion dollars. And so you know,
I've always said this about banking institutions is that it's
better to be to have a strong offense than a defense.
And so what I mean by that is your compliance.
(15:20):
So if your compliance is constantly trying to defend itself
from you know, the government coming after you, then you
got a problem. I think you have to these these
banks have to invest more money, more energy, more time
into building up a robust compliance department that will get
in front of the problem before it becomes a problem.
(15:42):
I mean, we remember well Fargo. Now look at TD Bank.
It's the biggest agreement a plea agreement in history and
that should really kind of shake all the financial institutions.
Speaker 3 (15:54):
That Department Justice I. R.
Speaker 2 (15:57):
S EEA was very focused on that To your question,
where else do we see as in regards to financial
organizations moneyloarning through money service providers as well, so or
money service businesses, And so we would see, for example,
when I was a Special.
Speaker 3 (16:16):
Agent in charge in New York, we had one.
Speaker 2 (16:18):
Particular MSB that was moving just under a billion dollars
a year back to China from many different criminal networks
throughout New York City. And so that's just another way
for them to send money back to China. And as
you mentioned, the money oftentimes, if I'm a Chinese businessman
(16:40):
and I want to invest in America, they'll exchange you
on in China and then the US cash will get
moved in the US that same business and they'll buy
real estate or buy businesses the United States to buy
luxury goods in the United States and.
Speaker 3 (16:56):
Ship it back to China.
Speaker 2 (16:57):
But the money really just enters into the banking or
the financial institutions. There's other methodologies that we're seeing more
and more of which is cryptocurrency as being utilized. As
I mentioned we're seeing ATMs pop up everywhere, especially in
cart helth controlled cities, especially in known criminal.
Speaker 3 (17:18):
Areas throughout the world.
Speaker 2 (17:20):
And so that more and more has really brought different
disparate groups of criminal organizations that historically never work together.
Now they're collaborating to move cryptocurrency throughout the world.
Speaker 3 (17:33):
And it's so fast, and it's a challenge.
Speaker 2 (17:35):
For law enforcement, because law enforcement, by and large still
works very much coming up into an organization and not
necessarily coming down into an organization.
Speaker 1 (17:47):
Is there a pathway where you could see imposing sanctions
of some kind on banks in China or Mexico that
are failing to properly monitor transactions or otherwise facilitating these flows.
Certainly we can get to US banks and hold them accountable,
but what about this extra territorial challenge and how we
(18:11):
address that.
Speaker 3 (18:13):
So it's a great question.
Speaker 2 (18:14):
It's one of those things that we we strongly believe
that that is a path forward for us.
Speaker 3 (18:20):
And I'll tell you why.
Speaker 2 (18:22):
The challenge for the fentannel trade and opioids and methem
FE I mean, has been that once we identify an
organization for a chemical company, individuals the executives, and we
charge that we indict them, they pivot and they just
shut down one company open up a new one. The
(18:44):
area that doesn't change is those banking institutions. They still
utilize the same banks, the same contacts, whether it's in
China or Mexico, Panama or the United States. And so
that is a key choke point for longforce and the
governments to really pursue these criminal organizations because that doesn't change,
(19:06):
and they and they need them, They need them to
help facilitate the movement of goods and money throughout the world.
So it is it's something that we certainly are discussing
of ways to really hold them accountable, and not just
in China, but also in Mexico.
Speaker 1 (19:23):
Yeah, it would seem like a good shout across the
vow going after a major bank in China where Mexico
or both could send send the right message. But I
also think there's a challenge in terms of following uh
these transactions and getting the level of transparency required to
really figure out, you know, which banks are complicit. And
(19:46):
some of that I think is tied into beneficial ownership
challenges shell corporations, you know, really uh, the opacity that
unfortunately defines some parts of our global fundingential system. How
important do you think it is to kind of address
this issue of beneficial ownership and shell corporations more generally
(20:09):
in the fight against ventanyl.
Speaker 2 (20:12):
It is very important, but it still remains to be
one of the biggest challenges in trying to trace back
Illsted funds. So we would see cartels in Mexico that
when they do have an affiliation to a certain industry,
they are not putting their names upwards in frontwards or
(20:33):
company that they own as the owner of a certain
business or an industry. They'll utilize individuals that have nothing
to do with the drug trades. So we'll see that
everything from shell companies to constantly comuos that are owned
by the cartels or important export companies, but they're often
(20:57):
there's no registration to determine who is the real owner
of these companies, and so going backwards into the banking institutions,
that's a challenge as well, who really owns the money
or who is tracing the money backwards. The cartel utilizes
unwinning or NONCRTEL members to also move money worldwide, and
(21:19):
so we've seen that from time to time. I remember
when we had the chop investigations. One of the key
things that the government wanted us to do is trace
back his money. And it was a challenge because we
believed that his money was tied up in the land,
and so he was buying real property with a lot
of the money, and he was buying it and then
(21:39):
he would give half of it to farmers in the
area and half of it was for poppy cultivation at
the time. So it still remains to be a challenge
for us. And that's just Mexico going into China. It's
even Harvard.
Speaker 1 (21:51):
Yeah, yeah, And it's a bit frustrating. I have to
say that. You know, it's taken so long to get
to a point where we're now addressing beneficial ownership. I mean,
the regulations are taking some time, and there's been quite
a bit of pushback around that. But when we think
about how these opaque structures that are inherent to our system, right,
(22:16):
that are really within the fabric of our system, and
how it's being weaponized against us, I can't imagine why
we wouldn't want to solve for that, right.
Speaker 3 (22:26):
It changes to it lane.
Speaker 2 (22:27):
So for example, we see what about fifty billion a
year in remittance from the US to Mexico. But these
are small amounts, you know, that aggregate into millions back
into the criminal networks in Mexico, and we'll see billions of.
Speaker 3 (22:43):
Dollars leaving the US going to.
Speaker 2 (22:46):
China, still utilizing some of the traditional methods through the
TD banking for example from last week and so. But
by and large, Mexican cartels will still get their money cash,
especially math money will still get smuggled down into Mexico
in cash or down to or to a bank along
(23:08):
the border and then pulled out of the bank. So
the banking institutions are still used. They're going to continue
to be used. And that's why I say that the
best thing that our bank could do is really just
have a strong compliance department that works with the government
and is constantly on top of the regulations and stay
engage and active to hold back from these criminals. It's
(23:31):
just a matter of when. If not, they're already doing it.
These criminal elements are going to try to expose weakness
and to move money worldwide through their banks.
Speaker 1 (23:42):
Yeah, what about some of these other non financial institutional
players and even the chat services like we chat that
are part of this money laundering challenge? What do you
think we need to be doing in terms of regulation
and oversight. I know you've looked into some of the
(24:04):
threads on we chat and you might want to share
some of that as well. It's an interesting you know,
it's an interesting story.
Speaker 3 (24:11):
Well it is.
Speaker 2 (24:12):
So it goes back into what I was talking about
in twenty sixteen, where we saw this convergence, right, this
convergence of how drugs would be marketed and how drugs
would be distributed, but also the technology behind it.
Speaker 3 (24:25):
So we talked about how the dark web or the
open web and social media was being utilized to now
help distribute drugs throughout the United States.
Speaker 2 (24:35):
But it's also came down to communication applications, so we
Chat or Signal or Telegram also venmo Zell cash app
made it so fast to do a transaction, to do
a deal in the case of we Chat, behind we
Chat and encrypted, so very little access to any data.
(25:00):
I'm off of we Chat, and so you had to
Chinese organized criminal groups that could very easily move money,
and they are moving money throughout the United States and
throughout the world on that platform. But then again it's
not just Rechat, it's other applications. Telegram was another one
in Mexico Signal to this day is another one of
(25:20):
WhatsApp another one. So the communication app applications really changed
how criminal groups could communicate, move money, organize the movement
of drugs the United States, arranging money pickups, and then
entering into the financial institutions. It made it so much
more efficient and faster. And so the challenge for law
(25:42):
enforcement is working with these companies and trying to get
them to work with us and then being able to
target those criminal networks that are exposing their platforms. But
it is a constant challenge, especially Inston.
Speaker 1 (26:01):
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(27:26):
should the tools you use to stop it. Learn more
at Hummingbird dot co. That's Hummingbird dot Co. Fentnyl is
the deadliest drug threat our nation has ever faced. End quote.
That's how Attorney General Mary Garland began a press conference
last year announcing eight indictments the Department of Justice brought
(27:47):
against China based chemical manufacturing companies, companies responsible for producing
the very chemical compounds that are used to make the
drugs that flood this country and lead to the deaths
of so many. Continuing my conversation with former DEA Head
of Operations Ray Donovan, we dive into a closer examination
of the flow and supply chains fueling the synthetic opioid epidemic.
(28:13):
I'd like to switch our focus a bit now and
talk about the precursor challenge. Precursor chemicals also a challenge
in terms of the Chinese origin of these chemicals that
are used to make fentanyl. The pills I think are
typically pressed in Mexico, but they rely on a steady
(28:37):
stream of precursors that we really haven't been able to curb,
and frankly where we're not getting much help, if any,
from the Chinese government. This is really a big part
of the supply chain challenge. What do you think we
could be doing around the precursor challenge? Do we need
(28:58):
a North American stretchtrategy to deal with that?
Speaker 3 (29:01):
Uh, it's a it's a great question.
Speaker 2 (29:04):
I think we need a whole of government strategy, right
and and and yes, the North American strategy, which would
mean that Mexico's partner with US. I speak to five
points in as far as fentanyl trafficking goes. The first
is manufacturing, actually looking at China and looking at the
(29:25):
production of fentanyl, fentanyl derivatives, the precursor precursor chemicals, and
then the exportation of those chemicals to the Western Hemisphere
being turned into the fentanyl and then traffic to the
United States. So that production is the first area to
really kind of go partner up with China and pressure
(29:46):
them to to just stop. Because one of the big
issues that came up and hearing Alan was the fact
that China was incentivizing the exportation of fentanyl into the
United States and Mexico and the precursor chemicals, and they
were doing this by giving thirteen percent tax rebates for
(30:08):
those for their precursors and fetnyl to come into and
be produced and exported directly into US. That's the first
thing that has to change right right off the bat.
If they drop that, then you see a significant drop
in regards to China. Then when you come into the
(30:28):
Western hemisphere. The next area or choke point is really
the ports Manzilon, Manzanillo, Vera Cruz. The ports are key
for chemicals coming into Mexico. There are some ports in
Central America that are utilized as well, but the key
ports in Mexico. Just being able to do a better
(30:50):
job of going after the chemicals as they come into test,
being tested and seized.
Speaker 3 (30:58):
In the ports would really we start to slow the
stem of production in Mexico.
Speaker 2 (31:05):
The issue that we've had in the past is that
we have seized tons of these chemicals and trying to
get rid of them and dispose of them becomes a challenge.
Speaker 3 (31:15):
So this is where you talked about a North American plan.
Speaker 2 (31:18):
Well, we need to have a plan of how we
would go after them season and dispose those chemicals because
they're NonStop and they're they're steadily flowing into Mexico. The
next area would be Glendestine laboratories in Mexico. So one
of the areas that we were focused in on many
years ago was really just going after the labs in
(31:38):
Mexico along with our Mexican partners and shutting down those laboratories.
Speaker 3 (31:44):
There was a time where we were taking down over
one hundred labs.
Speaker 2 (31:47):
Now it wasn't a year, and it wasn't just fentanyl
or meth, it was heroin, it was all illicted drugs,
but that trickled down to single digits recently.
Speaker 3 (31:57):
Now getting back to that would be key.
Speaker 2 (32:00):
The next focus area would be the border and strengthening
the border. Now we know that the vast majority of
drugs that come to the United States come in through
the border. Stronger technology, more personnel, more focused there, seizing
more would then definitely slowly the stem of illicit drugs
(32:22):
coming in and being distributed throughout the United States. And
my final point is really social media platforms. Historically, if
someone wanted to buy drugs, they knew an area in
their town where they would.
Speaker 3 (32:33):
Go, or an individual who was the deiler.
Speaker 2 (32:36):
Now that has moved to social media platforms more and
more so when delivery services where individuals could reach markets
all over and deliver drugs to anyone anywhere, and including
sending it directly to your house. So distribution has really
changed and it really has a lot to do with
(32:57):
social media platforms. So being able to work with them
to slow that flow of illicited drugs would also be
a game changer. Now that's on the supply side. On
the demand side. A lot more has to be done
in education, prevention, treatment, because you can't just attack the
problem from one side. I think you have to look
(33:17):
at it from both ends.
Speaker 1 (33:18):
Yeah, So, if we had the leverage to convince Mexico
to do certain things, to convince China to alter its behavior,
what are the one or two things that we should
be asking these countries to do and how would that
have an impact on reducing these flows into our country.
Speaker 2 (33:41):
So from Mexico, I would ask Mesco Mexico to do
to focus in on the ports, collaborate closely with CBP,
US Customs and border, a lot more resources there.
Speaker 3 (33:55):
You'd see an immediate impact, I think. And then second to.
Speaker 2 (33:59):
That would be to focus in on the clandest laboratories
in Mexico.
Speaker 3 (34:04):
That's one area. The other area would be to.
Speaker 2 (34:07):
Expedite extraditions to the United States because once that happened
in Columbia, we saw a complete transformation of the drug
trading in Colombia. Once Columbia, the Colombian government started extraditing
their their cartel members to the US. In fact, I
think it drove Columbian cartel members to push cocaine worldwide
(34:31):
and really in some cases avoid the United States because
of the laws in regards to China, would focus in
first to shut down the tax rebates as far as
the tax administration goes, and the exportation of fetnol derivatives
to the Western hemisphere.
Speaker 3 (34:49):
That would be an immediate change.
Speaker 2 (34:51):
And then and then really just collaborate more with the
United States to focus in on those bad actors that
continue to export and share that information and share that intelligence.
Speaker 3 (35:02):
You'd see an immediate impact. And I'll give you an
example of what that looks like. When COVID hit in
twenty twenty.
Speaker 2 (35:10):
We saw that Wuhan was locked down and so there
was a direct impact to the precursor chemicals or chemicals
just coming into Mexico. The price started going up everywhere
because there was no expectations.
Speaker 3 (35:25):
So that impact could.
Speaker 2 (35:27):
Easily change overnight if the PRC decided to and really
transform that. So those two areas, both in China and Mexico,
I think you would see and it wouldn't only impact
the fentnel trade. It would literally impact the drug trade.
So that meth of cocaine, you name it, it would
(35:48):
be a game.
Speaker 3 (35:49):
It would be a game chainer.
Speaker 1 (35:51):
Do you think it's a bridge too far to compel
or expect that China might cooperate with US on the
illicit financial flows and going after Chinese banks that are complicit.
Speaker 2 (36:04):
Well, I do think that it would be easier for
the PRC to collaborate with US going after the precursor
chemicals than going after the money flow and the financial institutions.
There's hundreds of billions of dollars in a black market
money in China that is not only coming from the
United States but throughout the world. That is a tremendous challenge.
(36:29):
I think for the Chinese to tackle that now they've
tried because of capital flight and billions of dollars leading China.
Speaker 3 (36:37):
They certainly want to keep the economy robust.
Speaker 2 (36:42):
But the challenge remains for US is about ultimately saving
American lives, and that has to do with the fentyl
hit in the streets of the United States and other
drugs quite frankly, and they have a direct role in
shutting that down the institution. I think institutions that will
be another challenge, a much.
Speaker 3 (37:03):
Bigger and broader challenge in my opinion.
Speaker 1 (37:07):
We think about these going back to the Chinese money
laundering networks and the reach and impact that they have.
I mean, you can go to I think pretty much
any country and find evidence of Chinese money laundering networks.
What do we need to be thinking about in terms
of future risks and threats beyond fentanyl? It seems to
(37:31):
me that you know the ability of these mirror networks
to facilitate many kinds of ilicted financial flows, certainly other
kinds of narcotics, but also funds associated with other illicted activity.
Speaker 3 (37:45):
Right, So that's a great question.
Speaker 2 (37:47):
So we're very much focused on phantomol, but we see
other opioids being produced and smuggled into the United States
directly from China, in particular the ninazines, protazines, we see xylazines,
We see many other different narcotics that are still smuggled
in the United States and produced in China. So the focus, yes,
(38:09):
in fan help because it's the most lethal. To answer
your question, where else do we see Chinese involvement, And
I want to be very specific, Chinese organized crime involvement
in money loaning.
Speaker 3 (38:22):
Oftentimes it's just behind commerce.
Speaker 2 (38:25):
So in the instances of Belton Road in South America,
Central America, you might see businesses that are really just
money launderings, that were propped up launder money throughout the world,
and in particular in Mexico. We've seen that in the
last twenty years, where we've seen Chinese organizations import exports
(38:46):
companies Cosadic Combia, shell companies, mining companies, and behind it
they are money laundering organizations moving money from China or
directly from the United States for cartels and conjunction with cartels,
and also do illicit business. So it's not only illicit,
(39:07):
but it's also lisit legal business. So they'll they'll they'll
do the combination of both in these countries and they'll
they don't co mingle the funds from both, and so.
Speaker 3 (39:19):
We've seen that and it continues to happen.
Speaker 1 (39:21):
Yeah, this is a fascinating angle. A few years ago,
I was working on some corruption research related to the
Belton Road Initiative and really digging into how the CCP,
the Chinese Communist Party, has used the VRI and Strategic
Corruption UH to influence both economically and politically and these
(39:42):
countries where they're operating, and we also looked at how
the Chinese diaspora come along with these projects and oftentimes
set up local communities and networks where they're selling Chinese
goods in country. We saw this in Africa for example.
(40:02):
Oftentimes you know Chinese individuals coming into these countries without visas,
so evading that process of normal immigration, but then also
setting up these networks. And so this is a really
interesting angle around the expansion of China's influence abroad, and
(40:26):
I think we do need to make that connectivity across
these different modes of investment and what comes along with
that in terms of the formal and informal networks that
ultimately have a huge influence on these countries.
Speaker 3 (40:39):
That's a great point.
Speaker 2 (40:41):
So there are challenges certainly within law enforcement's ability to
infiltrate these organizations, right, and so the Chinese, unlike other groups,
are very sophisticating and I think in compartmentalizing how they
wandered money, and so often at the lowest end of
money laundering, they're unwitting individuals that have no idea that
(41:05):
the money came from a drug cartel was derived from
drugs being distributed. Also, culturally, they don't see the movement
of cash as illegal, and this is our experience in
the United States, and so there's challenge. There's challenges in culture,
the challenge in the language, right, challenging in the fact
(41:27):
that it's international and it's in China, and we don't
have the same cooperation that we would get safe from Mexico.
So there's many different challenges for law enforcementially infiltrate and
take down these international groups. Now more and more we
see Chinese organized criminal groups that are really have taken
(41:48):
over money laundering in the United States. Historically it was
Colombian organizations and it was through black market pace to exchange.
Now today it is more and more Chinese will see
trainees organized criminal group that will dispatch individuals to cities
all throughout the United States just to pick up drug
proceeds and drive it back to New York City. And
(42:12):
then in New York City that money you would buy
goods and then it would be shipped on to China.
So that happens all the time now, NonStop. The challenge
now for US as a government is focusing in those
on those criminal networks and holding them accountable. Right because
we're talking about billions and billions of dollars. Yes, we
(42:35):
can very easily do that looking at the banks TD
Bank in particular and other banks, but it's not so
easy to look at an individual or network in a
community that is literally moving millions of dollars every day.
Speaker 3 (42:50):
And then say, okay, we're going to focus in on
this one individual because that individual is just part of
a larger group that is moving millions and millions of dollars.
And what I'd like to.
Speaker 2 (43:03):
See is our government hold them accountable as well, not
just the financial institutions.
Speaker 1 (43:11):
Yeah, so I know you started your career as a
border patrol agent many years ago, and I want to
pivot now to how ventanyl is coming across the border.
So I've seen estimates that somewhere in the neighborhood of
eighty percent of fentyl coming into the US is actually
being carried by US citizens. Now, one question that occurred
(43:34):
to me is if most of the interdiction is happening
at ports of entry, is that number skewed in some
way because what we're interdicting is coming through certain modalities
and certain groups of people versus what might be coming
in elsewhere, whether that's through the aviation system or maybe
(43:55):
illegally outside of legitimate ports of entry. So how do
you do you see this issue? I suppose either way
we have a challenge because it's coming in and really
hard to detect. We really don't have the screening capacity
to do that. So how do we start to think
(44:17):
about this challenge of interdiction?
Speaker 3 (44:20):
Right?
Speaker 2 (44:20):
So, I think the challenge of interdiction at the border
is has been our number one issue for many, many years. Really,
so when you look at CDP's role at Border Patrol,
they do the best job they could do. I think
with the limited resources that they have. Last year twenty
twenty three, cdpc's twenty seven pounds of fentodyl deacs about
(44:44):
twelve thousand, and so that means that the twelve thousand
that deac's was internally United States and.
Speaker 3 (44:51):
So clearly it still gets through.
Speaker 2 (44:54):
The issue for them is trying to balance commerce and
trade right legal trade between the United States and Mexico
and keep traffic flowing and trying to pick off bad actors.
Speaker 3 (45:07):
Trying to smuggle drugs in the United States.
Speaker 2 (45:10):
I think technology we can certainly there's enhanced technology that
will increase the odds of identifying and targeting. I think
what needs to happen specific to the border is more
of a whole the government approach and not just DEA
or CBP or Border Patrol or FBI, but a really
(45:32):
collaborative focus on the border of sharing intelligence and sharing
information to the target the networks and the nodes that
are right there at the border that are the smuggling
units on behalf of the card stop. These are these
subgroups that control the border and really are pushing their
drugs across into the ports of entry. Targeting them will
(45:55):
be a game gamer, I think, but that it does
take a folk is approach to to really dismantling and
disrupting that node in the cartel.
Speaker 1 (46:07):
Yeah, and it seems to me it's not only a
whole of government challenge for the US, but also for
the Mexican government. And we're now entering a new period
with Claudia Scheinbaum becoming president. I think she she was
recently installed and certainly has a lot of challenges and
also opportunities. I know you've spoken, Yeah, you've spoken previously
(46:32):
about this challenge between addressing these national security risks like
fentanyl and organized crime and those deep networks across our borders,
juxtaposed with the incredible trade relationship that we have with
Mexico and with Canada. It's a North American free trade
(46:52):
environment that is really the strongest in the world. And
we're coming up on the the review of the US
Mexico Canada Agreement, the U S m c A, which
is the successor to NAFTA, and I really think it's
it's going to be interesting to see how some of
these issues play out, including fentanyl. I could imagine that
(47:17):
it could become an issue UH in that free trade
discussion unless we make some progress before that, which of
course is challenging. But maybe that's a reason to really
get on this and see what we can do to
strengthen that engagement with the Mexicans, particularly around the corruption challenge.
(47:38):
And I know you've you've outlined that in UH in
other UH UH discussions and in your testimony, really getting
into the corruption challenge in Mexico. What can we be
doing to engage with Mexico at this stage, What what
should we be asking them for UH And how do
(47:59):
we think about this in terms of, you know, addressing
these national security challenges but also preserving a trade relationship
that is pretty valuable.
Speaker 2 (48:09):
Extremely valuable. I mean, there's no question about it. I mean,
it's it's it's it's one of our it's not our
biggest partner worldwide, is Mexico and they are a partner,
and it's just that I think that with the new
administration coming in coming in or here, it's an opportunity
for a reset, but certainly between us and then to
collaborate and focus in on those criminal groups that really
(48:31):
impact both countries, because Mexico is also being targeted as well.
I mean it's not just the United States. The amount
of violence and homicides that takes place each year in
Mexico is directly attributed to cartel activity. So I think
and the way is that who's really behind the cartel
(48:52):
is the question?
Speaker 3 (48:54):
And I've said this before and.
Speaker 2 (48:56):
I'll continue to say it is for many many decades now,
long enforcement has been focused just on the cartel and
and and the criminal elements associates to those to those
big organizations.
Speaker 3 (49:08):
But who's really behind that?
Speaker 2 (49:10):
Well, there are there is corruption, and it is at
the local, at the state, and even at.
Speaker 3 (49:16):
Times at the national level.
Speaker 2 (49:17):
And I think that we as we as a country
have to look at that and really focus in on
it because taking down the cartel, they're always replaceable, but
when you have corrupt officials that are behind them and propping.
Speaker 3 (49:31):
Them up and supporting them.
Speaker 2 (49:32):
That's where we can We can certainly assist UH Mexico
to really get after that and uphold the rule of
law law because we both need each other, there's no
doubt about it. And they and they are strong partners,
and we've had a history of success in Mexico collaborating
with our counterparts in Mexico. So so it's an interesting time.
(49:53):
I for one, think that it is a possibility for
before a reset and change. I do believe that President
Shaibam certainly respects the rule law and wants to you know,
pursue these criminal, bad actors that have impacted their country. Yeah.
Speaker 1 (50:13):
I actually think amidst all of these challenges, there's there's
a huge opportunity to rethink the border. And you know,
we talk about the North American free trade environment as
the leading trade block in the world. It's democratically driven.
Mexico is now our number one trading partner, and yet
we have a border that doesn't reflect the complexity of
(50:38):
that relationship or the opportunity. Uh maybe this is the
time to really push for that twenty first century border.
And you know, maybe the Fennel challenge gives us more
opportunity to get that message moving in the right way,
and thinking about the infrastructure needed on both sides of
the border, not only to dress that issue, but to
(51:01):
ensure that legitimate trade is facilitated the way that it
needs to be. You know, this is something we faced
after nine to eleven. I was at DHS during that
time working on some of the early programs like CTPAD
and the Container Security Initiative, and at that point we
were looking for the for the bomb in the box
and some of the legacy threats, particularly around narcotics. I
(51:24):
think took a bit of a back seat during that
time as we thought about the technology needed to address
the terrorist threat. But here we are now twenty years later,
with some of the same challenges at the border, but
trying to interdict the smallest of pills that are coming
in on us person. You know, it's it's really quite
(51:48):
a transformation. Not that we don't have a terrorist threat,
we do, but now we have something that is having
a massive impact when we think about all the all
the lives lost in America.
Speaker 2 (52:02):
Yeah, the border is absolutely integral to national security. I mean,
there's no question about it, but that encompasses many different things,
so it's not only terrorism, but.
Speaker 3 (52:12):
It's also drug trafficking.
Speaker 2 (52:14):
From a Mexican perspective, it's guns going south, and so
it is mutually beneficial to have a.
Speaker 3 (52:21):
Strong border in that regard.
Speaker 2 (52:24):
And I think that, you know, again, this isn't the
opportunity now to do that with a new administration, But
I think going backwards and further upstream, there's other areas
that we can collaborate and share information intelligence to go.
Speaker 3 (52:40):
After these bad actors that.
Speaker 2 (52:42):
Impact Mexico, for example, Chinese organized crime. It makes sense
for the Mexican government to want to pursue them and
hold them accountable just as much as it does for us.
And so that's an area that can immediately change overnight
that we are both focused in on these networks that
are working internationally in Mexico to bring precursor chemicals for
(53:07):
production of fennel.
Speaker 1 (53:08):
Yeah, what advice would you give financial institutions that are
trying to get a handle on these challenges? What would
be your top one or two recommendations?
Speaker 2 (53:20):
So my number one recommendation would be to invest in
your compliance. You know, I think more often than not
that's kind of like a secondary, oh, you know, to
regulatory responsibility. But I think, as history has proven, it
has to be a priority.
Speaker 3 (53:37):
For any banking institution.
Speaker 2 (53:39):
It has to be you have to know your customers,
you have to know if you're being exploited by criminal elements.
You have to collaborate with law enforcement, with Treasury, and
I think that the more you get in front of
that problem, the better, the safer.
Speaker 3 (53:57):
That you as a banking institution will be.
Speaker 2 (54:00):
And it goes back to my original statement, it's better
to be on an offense than to be playing defense.
I think that would be and that makes the most sense.
It's just a matter of when, if not, they are
not utilizing your branches, your banks to move millions of dollars,
(54:20):
and I think it's an opportunity to invest in compliance
and to and collaborate with the government.
Speaker 1 (54:27):
Great I thought we might end on a story. You
must have so many of them across your incredible career.
And also I want to just take a moment to
say thank you for your service to our country. You're
an incredible public servant and we're lucky that we had
you fighting the fight and now you're continuing to do that.
(54:48):
I know you were involved in the capture of l
Chapo both times and I thought it might be fun
to just end on that story and for you to
talk a little bit about the capture, the escape, and
then the recapture of this famous cartel figure.
Speaker 3 (55:08):
So the capture of El Choppo.
Speaker 2 (55:11):
Whenever I talked about El Choppo, what really stood out
to me most was the fact that you had fourteen
different agencies willing to put the egos aside and to
share intelligence those agencies for the sole purpose of going
after El Choppo. And what most people don't know is
(55:32):
that we weren't only going after El Chapo. We were
also going after his partner a mile at the same time.
Speaker 3 (55:38):
And so when we.
Speaker 2 (55:40):
First started investigation, many people didn't think that we could
do it because he was bigger than life. I mean,
he was in Forbes for being worth ten billion dollars.
He had this aura of untouched, untaught, being untouchable.
Speaker 3 (55:57):
And we put a team together and.
Speaker 2 (55:59):
For years, for about two years, all we did was
just build, build, build the investigation to the point where
we infiltrated his inner circle and eventually launched the operation
and we caught him.
Speaker 3 (56:15):
I mean, it took some time and it was a challenge.
Speaker 2 (56:17):
It wasn't easy, but I think really what stood out
for me the most was working with Mexico, working with
the Mexican Marines, working with all the US agencies, and
there was no there literally was no ego. Everyone said, Okay,
this is what I have, this is what I could
bring to the table. And what we realized is everyone
(56:39):
had a piece of the picture, and when you put
that together, he had clarity. So we were able to
infiltrate his inner circle and that's what ultimately won the
day and allowed for us to capture him. Now, that
was in twenty fourteen, early twenty fourteen. He escaped in
July of twenty fifteen, walked out of walk out, walked
(57:01):
out of a one point two mile long tunnel or
he was on a motorcycle and it took about ten
months to build that tunnel, and and he flew right
up to the mountains of Cinelower shortly thereafter. That was
disheartening because we knew what it took to really go
after in the first time, but we didn't quit. So
(57:24):
we brought the team back, that same team pretty much
from the first go around, same number of organizations, and
within about six weeks we were back into him after
his escape.
Speaker 3 (57:36):
So it took us two years to first go around.
It took us.
Speaker 2 (57:38):
About six weeks to get back into him because we
already built we already mapped out everyone around him, so
we knew who was in his inner circle, and so
we were already tracked him. About six weeks later we
launched an operation to go get him. He evaded us
for about two weeks. We were chasing him in the
in the in the jungles, in in Durango, in Mexico,
(58:02):
and eventually the Mexican Marines had a brilliant idea and
they wanted to flush him out. They knew that well,
we knew that he was up in a certain area
of Siniloa, up in the mountains. So the Mexican Marines,
and it was really their brilliant idea was We're just
going to go to every ranch and.
Speaker 3 (58:19):
Put pressure on them.
Speaker 2 (58:21):
Eventually they forced them out in the mountains down into
the city of Los Mochis and they captured them.
Speaker 3 (58:27):
And so that was.
Speaker 2 (58:30):
To me, that also kind of opened up the door
for a methodology of how we can collaborate with Mexico
and with our own agencies for any mission.
Speaker 1 (58:41):
Ray Donovan is a patriot, a noble public servant and leader,
and he's absolutely right. In order to counter the opioid
crisis in this country, we need the collaboration of our
government agencies, the collaboration of other countries, and the collaboration
of all of us. Not only do we need a
whole of government approach to countering the fentnel crisis, but
(59:02):
we also need a whole of industry approach, including the
financial institutions, messaging platforms, money transmitters, and alternate payment systems
that are compromised every single day. I thank Ray for
his public service and for joining me for this critical conversation.
It's time to rise to the challenge and dismantle these
criminal networks. I'm Moline Dozinski and this is coercive capital
(59:27):
on the illicit Edge network.
Today's podcast is supported by Winston and Strong LLP. Winston
and Strong, a trusted legal advisor and advocate for clients
across virtually every industry. Coercive Capital is proudly supported by Hummingbird.
Hummingbird is a modern compliance platform designed to make financial
crime investigations smarter, faster, and more effective. Because today's financial
(00:23):
criminals are sophisticated, savvy, and agile, meaning the tools used
to fight them should be too. Learn Moore at hummingbird
dot Co. Welcome to Coercive Capital. I'm Elaine Dozenski. There
(00:46):
is an opioid crisis.
Speaker 2 (00:47):
In this country.
Speaker 1 (00:48):
No one can deny this. The Center on Disease Control
estimates that in twenty twenty three, about two hundred Americans
died every day from opioid overdoses, more than seventy five
thousand Americans per year. It is the leading cause of
death for Americans between the ages of eighteen and forty five.
These are staggering statistics, and this is a trend that
(01:09):
all of us should do our part in helping to reverse.
One of the ways we might want to think about
combating this epidemic is to examine it through an economic
and financial lens. According to former Attorney General Bill Barr,
the opioid crisis, fueled mostly by fentanyl, costs the United
States nearly one point five trillion dollars in twenty twenty.
That's the equivalent of seven percent of US gross domestic product.
(01:33):
But there's another, perhaps worse aspect to this. Fentanyl, the
leading synthetic opioid, is fueled by Chinese underground money laundering
networks and Chinese manufacturers of precursor chemicals. Together with the
Mexican cartels responsible for making pills and distributing them. The
US is facing a massive economic security challenge trying to
(01:55):
address these illicit networks. In April twenty twenty four, report
from the House Select Committee on the Chinese Communist Party
examined how the People's Republic of China directly subsidizes the
exports of ninety seven percent of fentanyl precursors and deadly
fentanyl analogs and other synthetic narcotics chemicals that are illegal
(02:17):
under its own laws. Former Attorney General Barr has also
noted that without China's part, there would be no fentanyl crisis,
and yet China has done little to stop the flow.
There is no one better to examine the financing and
security issues related to fentanyl and the opioid crisis than
(02:38):
Ray Donovan, one of America's foremost experts on the matter
and a leading voice and helping us understand and expose
the vast money laundering networks that support the fentanyl trade.
Ray is a twenty eight year veteran of the DEA,
serving as its head of Operations and a Special Agent
in charge for the DEA's New York Division, responsible for
(03:01):
many of the highest level global narcotics, money laundering and
narco terrorism cases. He also ran the interagency team that
captured not once but twice and brought to justice the
notorious leader of the Sinaloa cartel, Chaffo Guzman. I recently
spoke with Ray in an effort to better understand more
(03:22):
about the financial and national security factors related to fentanyl
and what might be done about them. Ray, Welcome to
the show. I'm so honored to have you with us
on Coerse of Capital on the Illicid Edge Network. Thank
you for being here today to talk to us about
the fentyl challenge that we're facing.
Speaker 3 (03:41):
Thank you for having me, Alane.
Speaker 1 (03:43):
It's my pleasure thank you so much. I want to
jump right into the angle for our conversation, which is
really digging into the money laundering networks that fuel this crisis.
And it's something I and others have written about as
a money laundering crisis fueling a drug crisis, and one
that has taken the lives of about two hundred and
(04:05):
fifty thousand Americans since twenty eighteen. It's incredible the impact
that this epidemic, this crisis has had on the US
and why it's a national and economic security challenge for US.
But maybe to jump right into the money laundering analysis,
you know, we're not talking about the old regime of
(04:29):
cartel controlled bags of cash showing up at the border,
you know, as we might have seen with the heroin epidemic.
But how do we get to where we are now,
which is a really sophisticated money laundering operation driven by
the Chinese. When did you start to kind of see
this change in terms of how cash, illicit cash is
(04:52):
moving through the system.
Speaker 2 (04:56):
So let me give you a foundation very quickly of
what that looks like. So historically, when you look at
the illicit narcotics and cocaine, let's just take cocaine as
an example. Primarily, the methodology of laundering or cleaning that
money back to source countries like Columbia would be through
bulk cash smuggling or black market pace to exchange those
(05:20):
who were the two methodologies with synthetics, which is methamphetamine
or fentanyl. We started seeing other technologies, other methodologies deployed
specifically by the Chinese to move money a lot faster.
And as though technologies advanced, like digital currencies, we started
(05:41):
seeing digital currency ATMs popping up, a bitcoin e ATMs
popping up all.
Speaker 3 (05:48):
Over South America.
Speaker 2 (05:49):
We started seeing Chinese organized criminal groups not only using
financial institutions or trade based money laundering, but also using
a whole host of different methas to move money a
lot faster than historically how we would see that. That
started around twenty thirteen twenty fourteen is when we started
seeing precursor chemicals for fentanyl come into the United States
(06:13):
the Southwest border and then smuggled into Mexico converted into fentanyl,
and at the time it was being added to heroin
and then smuggled back north. That's when we started seeing
Chinese organized crime start to really take a hold in
regards to the pentomyl crisis, but prior to that they
were already involved with methamfetamine production throughout Mexico. Twenty sixteen
(06:37):
was a key year for US, though we see it
as a convergent year because at the time you had
Mexican cartels that were pressing fake fentanyl pills.
Speaker 3 (06:48):
We saw the dark web, social media, We saw the.
Speaker 2 (06:52):
Populations that historically used heroin and historically used diverted pharmaceuticals
now to converge.
Speaker 3 (07:00):
So it just exploded.
Speaker 2 (07:01):
We started seeing a lot more smuggling of fentanyl directly
into the United States around that time period.
Speaker 1 (07:08):
Yeah, it's like a perfect illicit storm that you're talking about.
Maybe we could dig a little bit more into this
money laundering triangle that is fueled through these Chinese money
laundering networks, their ability to operate globally, the convergence of
that network with the needs of Mexican cartels, and of
(07:32):
course the growing demand for fentanyl in the US. Can
you walk us through exactly how this triangular trade is happening.
Speaker 2 (07:44):
So the Chinese became experts in what we call mirrors
or in Mexico espos, and really what that's indicative of
is the speed by which money is exchanged and transferred
back to the cartel. And I'll give you an example.
If drug cartel smuggled their drugs across the border and
(08:04):
it's distributed in an area, it's then picked up and aggregated,
and then it would be be passed off to a
US cartel or money broker's point of contact. As soon
as that money is picked up and delivered to Chinese,
the Chinese side of that, the money would be released
in the paesos would be released in Mexico back to
(08:27):
the cartel. It was immediate, there was no drag or
wasting time. But it's really indicative of what black market
payso exchange where he is. So I think I have
to explain that a little bit so that the audience
understands what that looks like.
Speaker 3 (08:43):
So, the cartel number one goal is to.
Speaker 2 (08:45):
Make money, and more often not it's in US cash,
and their goal is to get that money back to
whether it's in Columbia, whether it's in Mexico, get it
back to their country. And so the fastest way to
do that historically has been through black market payso exchange.
And so what that means is you'll have a business
(09:07):
a money broker in Mexico. That money broker would then
go to a business person, Let's say a Mexican business
that is looking for US products and has a US exporterer,
and so they have to get US cash to that
export to get those goods. And so what they will
do is exchange paesos four dollars back to the drug
(09:28):
cartel four fee. And why does it work for them?
It works because they avoid taxes, they avoid tariffs in
some cases bank fees, and so they're really see and
also the exchange rates.
Speaker 3 (09:44):
So they're saving money by going through the.
Speaker 2 (09:47):
Black market and opposed to going from bank to bank, right,
and so they're getting their hands on US goods. So
often it would be a Mexican business or Columbian business
that is going to the money broker. The money brokers
really playing in middleman between a cartel and that business
in that country. Where the Chinese got so sophisticated is
(10:09):
that the Chinese were also the exporters and the importers.
So you'll have Chinese businesses in Mexico that are the
importers and Chinese businesses in China that are the manufacturers
and exporters. And so they were making money on both ends,
and they still are. And there's there's many methodologies that
(10:31):
they deployed. They could use the financial institutions that we
see more cash is still deployed as well, but trade
based money leadering it is by far the big biggest
method and the fastest, and it is the most lucrative
method for.
Speaker 3 (10:46):
Them to move money worldwide.
Speaker 2 (10:49):
And I'll give you an actual case example that I
had while I was a special agent in charge in
New York.
Speaker 3 (10:55):
We had a group that was moving phones.
Speaker 2 (10:59):
They would buy Apple phones, Android phones, and for example,
they would spend one hundred thousand dollars on the phone,
while at the time, all those phones back in China,
even though they were manufactured in China, were worth three
hundred percent of a markup on what they cost in
the United States.
Speaker 3 (11:18):
So even when the Chinese.
Speaker 2 (11:20):
Criminal groups were losing money, they were still making money
and it was very fast. Now phones were one thing, clothing,
you name it, cars, expensive wine, all American goods that
would be purchased with drug proceeds, put in a container
and shipped to China sold, recouped the investment and make
(11:40):
a profit on top of that. Well, then you would
have these Chinese businesses that exist both in Mexico and
China that would either wire the money or send goods,
and the good would be sold in Mexico. So when
you talk about the triangule, you're looking at United States, China,
and Mexico and a movement of money and good behind
(12:02):
behind the drug trade.
Speaker 1 (12:04):
Yeah, let's talk a little bit about the trade based
money laundering angle, because I think this is a particularly
challenging part of this problem. How do you how do
you think we should go after this trade based money
laundering risk? What is it that we need to be doing.
Is it better manifest information, is it more coordination, Uh
(12:29):
maybe with Mexico and Mexican ports. What what do you
think that looks like?
Speaker 2 (12:35):
So trade based money laundering is really challenging go after.
Obviously it's a lot easier for us with the BSA
to go after you know, criminal groups utilizing financial institutions.
But trade based money learning is just that there's not
very there isn't too much regulations. I mean, yes, we
(12:57):
may have to fill out a form if someone comes
in and spence thousand dollars in a specific store, but
you can come in with five thousand, three thousand and
constantly bye bye, bye bye, and you're basically washing money
relatively quickly. That is a challenge because we don't want
to slow down commerce, but at the same time, we
(13:18):
want to be able to identify and go after these
criminal networks.
Speaker 3 (13:22):
And I think there are some areas.
Speaker 2 (13:24):
Where we could focus in on that will really kind
of pin down some of these groups that are at
scale utilizing our economy to launder billions of dollars across
the world. And that's one of those things that came
up in the hearing that we had back in April
this year to talk about ways that we can go
(13:44):
forward against these criminal elements that are utilizing our system
to their advantage.
Speaker 1 (13:52):
Yeah. Absolutely, let's go back as well to the Fenel
money laundering triangle that you've laid out. One of the
challenges is that the dollars don't leave the US, the
pesos don't leave Mexico, the R and B don't leave China.
There's a mirrored network. It's very sophisticated. It's working globally
(14:16):
to to to facilitate a lot of criminal activity, not
just fentanyl, but it also presents a particular challenge for
financial institutions. First, and foremost, I think because it's difficult
to be able to pinpoint the particular money laundering risks
(14:37):
as cash moves moves into the system, but also because
increasingly these transactions, as I understand it, are happening outside
of the traditional financial system. Could you help us understand
the migration of that thread and why this is such
a challenge for banks.
Speaker 3 (14:57):
It does still happen throughout main banks.
Speaker 2 (15:00):
So I'll give you an example of just what happened
last week with the plea agreement of TD Bank uh
to the tune of three billion dollars. And so you know,
I've always said this about banking institutions is that it's
better to be to have a strong offense than a defense.
And so what I mean by that is your compliance.
(15:20):
So if your compliance is constantly trying to defend itself
from you know, the government coming after you, then you
got a problem. I think you have to these these
banks have to invest more money, more energy, more time
into building up a robust compliance department that will get
in front of the problem before it becomes a problem.
(15:42):
I mean, we remember well Fargo. Now look at TD Bank.
It's the biggest agreement a plea agreement in history and
that should really kind of shake all the financial institutions.
Speaker 3 (15:54):
That Department Justice I. R.
Speaker 2 (15:57):
S EEA was very focused on that To your question,
where else do we see as in regards to financial
organizations moneyloarning through money service providers as well, so or
money service businesses, And so we would see, for example,
when I was a Special.
Speaker 3 (16:16):
Agent in charge in New York, we had one.
Speaker 2 (16:18):
Particular MSB that was moving just under a billion dollars
a year back to China from many different criminal networks
throughout New York City. And so that's just another way
for them to send money back to China. And as
you mentioned, the money oftentimes, if I'm a Chinese businessman
(16:40):
and I want to invest in America, they'll exchange you
on in China and then the US cash will get
moved in the US that same business and they'll buy
real estate or buy businesses the United States to buy
luxury goods in the United States and.
Speaker 3 (16:56):
Ship it back to China.
Speaker 2 (16:57):
But the money really just enters into the banking or
the financial institutions. There's other methodologies that we're seeing more
and more of which is cryptocurrency as being utilized. As
I mentioned we're seeing ATMs pop up everywhere, especially in
cart helth controlled cities, especially in known criminal.
Speaker 3 (17:18):
Areas throughout the world.
Speaker 2 (17:20):
And so that more and more has really brought different
disparate groups of criminal organizations that historically never work together.
Now they're collaborating to move cryptocurrency throughout the world.
Speaker 3 (17:33):
And it's so fast, and it's a challenge.
Speaker 2 (17:35):
For law enforcement, because law enforcement, by and large still
works very much coming up into an organization and not
necessarily coming down into an organization.
Speaker 1 (17:47):
Is there a pathway where you could see imposing sanctions
of some kind on banks in China or Mexico that
are failing to properly monitor transactions or otherwise facilitating these flows.
Certainly we can get to US banks and hold them accountable,
but what about this extra territorial challenge and how we
(18:11):
address that.
Speaker 3 (18:13):
So it's a great question.
Speaker 2 (18:14):
It's one of those things that we we strongly believe
that that is a path forward for us.
Speaker 3 (18:20):
And I'll tell you why.
Speaker 2 (18:22):
The challenge for the fentannel trade and opioids and methem
FE I mean, has been that once we identify an
organization for a chemical company, individuals the executives, and we
charge that we indict them, they pivot and they just
shut down one company open up a new one. The
(18:44):
area that doesn't change is those banking institutions. They still
utilize the same banks, the same contacts, whether it's in
China or Mexico, Panama or the United States. And so
that is a key choke point for longforce and the
governments to really pursue these criminal organizations because that doesn't change,
(19:06):
and they and they need them, They need them to
help facilitate the movement of goods and money throughout the world.
So it is it's something that we certainly are discussing
of ways to really hold them accountable, and not just
in China, but also in Mexico.
Speaker 1 (19:23):
Yeah, it would seem like a good shout across the
vow going after a major bank in China where Mexico
or both could send send the right message. But I
also think there's a challenge in terms of following uh
these transactions and getting the level of transparency required to
really figure out, you know, which banks are complicit. And
(19:46):
some of that I think is tied into beneficial ownership
challenges shell corporations, you know, really uh, the opacity that
unfortunately defines some parts of our global fundingential system. How
important do you think it is to kind of address
this issue of beneficial ownership and shell corporations more generally
(20:09):
in the fight against ventanyl.
Speaker 2 (20:12):
It is very important, but it still remains to be
one of the biggest challenges in trying to trace back
Illsted funds. So we would see cartels in Mexico that
when they do have an affiliation to a certain industry,
they are not putting their names upwards in frontwards or
(20:33):
company that they own as the owner of a certain
business or an industry. They'll utilize individuals that have nothing
to do with the drug trades. So we'll see that
everything from shell companies to constantly comuos that are owned
by the cartels or important export companies, but they're often
(20:57):
there's no registration to determine who is the real owner
of these companies, and so going backwards into the banking institutions,
that's a challenge as well, who really owns the money
or who is tracing the money backwards. The cartel utilizes
unwinning or NONCRTEL members to also move money worldwide, and
(21:19):
so we've seen that from time to time. I remember
when we had the chop investigations. One of the key
things that the government wanted us to do is trace
back his money. And it was a challenge because we
believed that his money was tied up in the land,
and so he was buying real property with a lot
of the money, and he was buying it and then
(21:39):
he would give half of it to farmers in the
area and half of it was for poppy cultivation at
the time. So it still remains to be a challenge
for us. And that's just Mexico going into China. It's
even Harvard.
Speaker 1 (21:51):
Yeah, yeah, And it's a bit frustrating. I have to
say that. You know, it's taken so long to get
to a point where we're now addressing beneficial ownership. I mean,
the regulations are taking some time, and there's been quite
a bit of pushback around that. But when we think
about how these opaque structures that are inherent to our system, right,
(22:16):
that are really within the fabric of our system, and
how it's being weaponized against us, I can't imagine why
we wouldn't want to solve for that, right.
Speaker 3 (22:26):
It changes to it lane.
Speaker 2 (22:27):
So for example, we see what about fifty billion a
year in remittance from the US to Mexico. But these
are small amounts, you know, that aggregate into millions back
into the criminal networks in Mexico, and we'll see billions of.
Speaker 3 (22:43):
Dollars leaving the US going to.
Speaker 2 (22:46):
China, still utilizing some of the traditional methods through the
TD banking for example from last week and so. But
by and large, Mexican cartels will still get their money cash,
especially math money will still get smuggled down into Mexico
in cash or down to or to a bank along
(23:08):
the border and then pulled out of the bank. So
the banking institutions are still used. They're going to continue
to be used. And that's why I say that the
best thing that our bank could do is really just
have a strong compliance department that works with the government
and is constantly on top of the regulations and stay
engage and active to hold back from these criminals. It's
(23:31):
just a matter of when. If not, they're already doing it.
These criminal elements are going to try to expose weakness
and to move money worldwide through their banks.
Speaker 1 (23:42):
Yeah, what about some of these other non financial institutional
players and even the chat services like we chat that
are part of this money laundering challenge? What do you
think we need to be doing in terms of regulation
and oversight. I know you've looked into some of the
(24:04):
threads on we chat and you might want to share
some of that as well. It's an interesting you know,
it's an interesting story.
Speaker 3 (24:11):
Well it is.
Speaker 2 (24:12):
So it goes back into what I was talking about
in twenty sixteen, where we saw this convergence, right, this
convergence of how drugs would be marketed and how drugs
would be distributed, but also the technology behind it.
Speaker 3 (24:25):
So we talked about how the dark web or the
open web and social media was being utilized to now
help distribute drugs throughout the United States.
Speaker 2 (24:35):
But it's also came down to communication applications, so we
Chat or Signal or Telegram also venmo Zell cash app
made it so fast to do a transaction, to do
a deal in the case of we Chat, behind we
Chat and encrypted, so very little access to any data.
(25:00):
I'm off of we Chat, and so you had to
Chinese organized criminal groups that could very easily move money,
and they are moving money throughout the United States and
throughout the world on that platform. But then again it's
not just Rechat, it's other applications. Telegram was another one
in Mexico Signal to this day is another one of
(25:20):
WhatsApp another one. So the communication app applications really changed
how criminal groups could communicate, move money, organize the movement
of drugs the United States, arranging money pickups, and then
entering into the financial institutions. It made it so much
more efficient and faster. And so the challenge for law
(25:42):
enforcement is working with these companies and trying to get
them to work with us and then being able to
target those criminal networks that are exposing their platforms. But
it is a constant challenge, especially Inston.
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(27:26):
should the tools you use to stop it. Learn more
at Hummingbird dot co. That's Hummingbird dot Co. Fentnyl is
the deadliest drug threat our nation has ever faced. End quote.
That's how Attorney General Mary Garland began a press conference
last year announcing eight indictments the Department of Justice brought
(27:47):
against China based chemical manufacturing companies, companies responsible for producing
the very chemical compounds that are used to make the
drugs that flood this country and lead to the deaths
of so many. Continuing my conversation with former DEA Head
of Operations Ray Donovan, we dive into a closer examination
of the flow and supply chains fueling the synthetic opioid epidemic.
(28:13):
I'd like to switch our focus a bit now and
talk about the precursor challenge. Precursor chemicals also a challenge
in terms of the Chinese origin of these chemicals that
are used to make fentanyl. The pills I think are
typically pressed in Mexico, but they rely on a steady
(28:37):
stream of precursors that we really haven't been able to curb,
and frankly where we're not getting much help, if any,
from the Chinese government. This is really a big part
of the supply chain challenge. What do you think we
could be doing around the precursor challenge? Do we need
(28:58):
a North American stretchtrategy to deal with that?
Speaker 3 (29:01):
Uh, it's a it's a great question.
Speaker 2 (29:04):
I think we need a whole of government strategy, right
and and and yes, the North American strategy, which would
mean that Mexico's partner with US. I speak to five
points in as far as fentanyl trafficking goes. The first
is manufacturing, actually looking at China and looking at the
(29:25):
production of fentanyl, fentanyl derivatives, the precursor precursor chemicals, and
then the exportation of those chemicals to the Western Hemisphere
being turned into the fentanyl and then traffic to the
United States. So that production is the first area to
really kind of go partner up with China and pressure
(29:46):
them to to just stop. Because one of the big
issues that came up and hearing Alan was the fact
that China was incentivizing the exportation of fentanyl into the
United States and Mexico and the precursor chemicals, and they
were doing this by giving thirteen percent tax rebates for
(30:08):
those for their precursors and fetnyl to come into and
be produced and exported directly into US. That's the first
thing that has to change right right off the bat.
If they drop that, then you see a significant drop
in regards to China. Then when you come into the
(30:28):
Western hemisphere. The next area or choke point is really
the ports Manzilon, Manzanillo, Vera Cruz. The ports are key
for chemicals coming into Mexico. There are some ports in
Central America that are utilized as well, but the key
ports in Mexico. Just being able to do a better
(30:50):
job of going after the chemicals as they come into test,
being tested and seized.
Speaker 3 (30:58):
In the ports would really we start to slow the
stem of production in Mexico.
Speaker 2 (31:05):
The issue that we've had in the past is that
we have seized tons of these chemicals and trying to
get rid of them and dispose of them becomes a challenge.
Speaker 3 (31:15):
So this is where you talked about a North American plan.
Speaker 2 (31:18):
Well, we need to have a plan of how we
would go after them season and dispose those chemicals because
they're NonStop and they're they're steadily flowing into Mexico. The
next area would be Glendestine laboratories in Mexico. So one
of the areas that we were focused in on many
years ago was really just going after the labs in
(31:38):
Mexico along with our Mexican partners and shutting down those laboratories.
Speaker 3 (31:44):
There was a time where we were taking down over
one hundred labs.
Speaker 2 (31:47):
Now it wasn't a year, and it wasn't just fentanyl
or meth, it was heroin, it was all illicted drugs,
but that trickled down to single digits recently.
Speaker 3 (31:57):
Now getting back to that would be key.
Speaker 2 (32:00):
The next focus area would be the border and strengthening
the border. Now we know that the vast majority of
drugs that come to the United States come in through
the border. Stronger technology, more personnel, more focused there, seizing
more would then definitely slowly the stem of illicit drugs
(32:22):
coming in and being distributed throughout the United States. And
my final point is really social media platforms. Historically, if
someone wanted to buy drugs, they knew an area in
their town where they would.
Speaker 3 (32:33):
Go, or an individual who was the deiler.
Speaker 2 (32:36):
Now that has moved to social media platforms more and
more so when delivery services where individuals could reach markets
all over and deliver drugs to anyone anywhere, and including
sending it directly to your house. So distribution has really
changed and it really has a lot to do with
(32:57):
social media platforms. So being able to work with them
to slow that flow of illicited drugs would also be
a game changer. Now that's on the supply side. On
the demand side. A lot more has to be done
in education, prevention, treatment, because you can't just attack the
problem from one side. I think you have to look
(33:17):
at it from both ends.
Speaker 1 (33:18):
Yeah, So, if we had the leverage to convince Mexico
to do certain things, to convince China to alter its behavior,
what are the one or two things that we should
be asking these countries to do and how would that
have an impact on reducing these flows into our country.
Speaker 2 (33:41):
So from Mexico, I would ask Mesco Mexico to do
to focus in on the ports, collaborate closely with CBP,
US Customs and border, a lot more resources there.
Speaker 3 (33:55):
You'd see an immediate impact, I think. And then second to.
Speaker 2 (33:59):
That would be to focus in on the clandest laboratories
in Mexico.
Speaker 3 (34:04):
That's one area. The other area would be to.
Speaker 2 (34:07):
Expedite extraditions to the United States because once that happened
in Columbia, we saw a complete transformation of the drug
trading in Colombia. Once Columbia, the Colombian government started extraditing
their their cartel members to the US. In fact, I
think it drove Columbian cartel members to push cocaine worldwide
(34:31):
and really in some cases avoid the United States because
of the laws in regards to China, would focus in
first to shut down the tax rebates as far as
the tax administration goes, and the exportation of fetnol derivatives
to the Western hemisphere.
Speaker 3 (34:49):
That would be an immediate change.
Speaker 2 (34:51):
And then and then really just collaborate more with the
United States to focus in on those bad actors that
continue to export and share that information and share that intelligence.
Speaker 3 (35:02):
You'd see an immediate impact. And I'll give you an
example of what that looks like. When COVID hit in
twenty twenty.
Speaker 2 (35:10):
We saw that Wuhan was locked down and so there
was a direct impact to the precursor chemicals or chemicals
just coming into Mexico. The price started going up everywhere
because there was no expectations.
Speaker 3 (35:25):
So that impact could.
Speaker 2 (35:27):
Easily change overnight if the PRC decided to and really
transform that. So those two areas, both in China and Mexico,
I think you would see and it wouldn't only impact
the fentnel trade. It would literally impact the drug trade.
So that meth of cocaine, you name it, it would
(35:48):
be a game.
Speaker 3 (35:49):
It would be a game chainer.
Speaker 1 (35:51):
Do you think it's a bridge too far to compel
or expect that China might cooperate with US on the
illicit financial flows and going after Chinese banks that are complicit.
Speaker 2 (36:04):
Well, I do think that it would be easier for
the PRC to collaborate with US going after the precursor
chemicals than going after the money flow and the financial institutions.
There's hundreds of billions of dollars in a black market
money in China that is not only coming from the
United States but throughout the world. That is a tremendous challenge.
(36:29):
I think for the Chinese to tackle that now they've
tried because of capital flight and billions of dollars leading China.
Speaker 3 (36:37):
They certainly want to keep the economy robust.
Speaker 2 (36:42):
But the challenge remains for US is about ultimately saving
American lives, and that has to do with the fentyl
hit in the streets of the United States and other
drugs quite frankly, and they have a direct role in
shutting that down the institution. I think institutions that will
be another challenge, a much.
Speaker 3 (37:03):
Bigger and broader challenge in my opinion.
Speaker 1 (37:07):
We think about these going back to the Chinese money
laundering networks and the reach and impact that they have.
I mean, you can go to I think pretty much
any country and find evidence of Chinese money laundering networks.
What do we need to be thinking about in terms
of future risks and threats beyond fentanyl? It seems to
(37:31):
me that you know the ability of these mirror networks
to facilitate many kinds of ilicted financial flows, certainly other
kinds of narcotics, but also funds associated with other illicted activity.
Speaker 3 (37:45):
Right, So that's a great question.
Speaker 2 (37:47):
So we're very much focused on phantomol, but we see
other opioids being produced and smuggled into the United States
directly from China, in particular the ninazines, protazines, we see xylazines,
We see many other different narcotics that are still smuggled
in the United States and produced in China. So the focus, yes,
(38:09):
in fan help because it's the most lethal. To answer
your question, where else do we see Chinese involvement, And
I want to be very specific, Chinese organized crime involvement
in money loaning.
Speaker 3 (38:22):
Oftentimes it's just behind commerce.
Speaker 2 (38:25):
So in the instances of Belton Road in South America,
Central America, you might see businesses that are really just
money launderings, that were propped up launder money throughout the world,
and in particular in Mexico. We've seen that in the
last twenty years, where we've seen Chinese organizations import exports
(38:46):
companies Cosadic Combia, shell companies, mining companies, and behind it
they are money laundering organizations moving money from China or
directly from the United States for cartels and conjunction with cartels,
and also do illicit business. So it's not only illicit,
(39:07):
but it's also lisit legal business. So they'll they'll they'll
do the combination of both in these countries and they'll
they don't co mingle the funds from both, and so.
Speaker 3 (39:19):
We've seen that and it continues to happen.
Speaker 1 (39:21):
Yeah, this is a fascinating angle. A few years ago,
I was working on some corruption research related to the
Belton Road Initiative and really digging into how the CCP,
the Chinese Communist Party, has used the VRI and Strategic
Corruption UH to influence both economically and politically and these
(39:42):
countries where they're operating, and we also looked at how
the Chinese diaspora come along with these projects and oftentimes
set up local communities and networks where they're selling Chinese
goods in country. We saw this in Africa for example.
(40:02):
Oftentimes you know Chinese individuals coming into these countries without visas,
so evading that process of normal immigration, but then also
setting up these networks. And so this is a really
interesting angle around the expansion of China's influence abroad, and
(40:26):
I think we do need to make that connectivity across
these different modes of investment and what comes along with
that in terms of the formal and informal networks that
ultimately have a huge influence on these countries.
Speaker 3 (40:39):
That's a great point.
Speaker 2 (40:41):
So there are challenges certainly within law enforcement's ability to
infiltrate these organizations, right, and so the Chinese, unlike other groups,
are very sophisticating and I think in compartmentalizing how they
wandered money, and so often at the lowest end of
money laundering, they're unwitting individuals that have no idea that
(41:05):
the money came from a drug cartel was derived from
drugs being distributed. Also, culturally, they don't see the movement
of cash as illegal, and this is our experience in
the United States, and so there's challenge. There's challenges in culture,
the challenge in the language, right, challenging in the fact
(41:27):
that it's international and it's in China, and we don't
have the same cooperation that we would get safe from Mexico.
So there's many different challenges for law enforcementially infiltrate and
take down these international groups. Now more and more we
see Chinese organized criminal groups that are really have taken
(41:48):
over money laundering in the United States. Historically it was
Colombian organizations and it was through black market pace to exchange.
Now today it is more and more Chinese will see
trainees organized criminal group that will dispatch individuals to cities
all throughout the United States just to pick up drug
proceeds and drive it back to New York City. And
(42:12):
then in New York City that money you would buy
goods and then it would be shipped on to China.
So that happens all the time now, NonStop. The challenge
now for US as a government is focusing in those
on those criminal networks and holding them accountable. Right because
we're talking about billions and billions of dollars. Yes, we
(42:35):
can very easily do that looking at the banks TD
Bank in particular and other banks, but it's not so
easy to look at an individual or network in a
community that is literally moving millions of dollars every day.
Speaker 3 (42:50):
And then say, okay, we're going to focus in on
this one individual because that individual is just part of
a larger group that is moving millions and millions of dollars.
And what I'd like to.
Speaker 2 (43:03):
See is our government hold them accountable as well, not
just the financial institutions.
Speaker 1 (43:11):
Yeah, so I know you started your career as a
border patrol agent many years ago, and I want to
pivot now to how ventanyl is coming across the border.
So I've seen estimates that somewhere in the neighborhood of
eighty percent of fentyl coming into the US is actually
being carried by US citizens. Now, one question that occurred
(43:34):
to me is if most of the interdiction is happening
at ports of entry, is that number skewed in some
way because what we're interdicting is coming through certain modalities
and certain groups of people versus what might be coming
in elsewhere, whether that's through the aviation system or maybe
(43:55):
illegally outside of legitimate ports of entry. So how do
you do you see this issue? I suppose either way
we have a challenge because it's coming in and really
hard to detect. We really don't have the screening capacity
to do that. So how do we start to think
(44:17):
about this challenge of interdiction?
Speaker 3 (44:20):
Right?
Speaker 2 (44:20):
So, I think the challenge of interdiction at the border
is has been our number one issue for many, many years. Really,
so when you look at CDP's role at Border Patrol,
they do the best job they could do. I think
with the limited resources that they have. Last year twenty
twenty three, cdpc's twenty seven pounds of fentodyl deacs about
(44:44):
twelve thousand, and so that means that the twelve thousand
that deac's was internally United States and.
Speaker 3 (44:51):
So clearly it still gets through.
Speaker 2 (44:54):
The issue for them is trying to balance commerce and
trade right legal trade between the United States and Mexico
and keep traffic flowing and trying to pick off bad actors.
Speaker 3 (45:07):
Trying to smuggle drugs in the United States.
Speaker 2 (45:10):
I think technology we can certainly there's enhanced technology that
will increase the odds of identifying and targeting. I think
what needs to happen specific to the border is more
of a whole the government approach and not just DEA
or CBP or Border Patrol or FBI, but a really
(45:32):
collaborative focus on the border of sharing intelligence and sharing
information to the target the networks and the nodes that
are right there at the border that are the smuggling
units on behalf of the card stop. These are these
subgroups that control the border and really are pushing their
drugs across into the ports of entry. Targeting them will
(45:55):
be a game gamer, I think, but that it does
take a folk is approach to to really dismantling and
disrupting that node in the cartel.
Speaker 1 (46:07):
Yeah, and it seems to me it's not only a
whole of government challenge for the US, but also for
the Mexican government. And we're now entering a new period
with Claudia Scheinbaum becoming president. I think she she was
recently installed and certainly has a lot of challenges and
also opportunities. I know you've spoken, Yeah, you've spoken previously
(46:32):
about this challenge between addressing these national security risks like
fentanyl and organized crime and those deep networks across our borders,
juxtaposed with the incredible trade relationship that we have with
Mexico and with Canada. It's a North American free trade
(46:52):
environment that is really the strongest in the world. And
we're coming up on the the review of the US
Mexico Canada Agreement, the U S m c A, which
is the successor to NAFTA, and I really think it's
it's going to be interesting to see how some of
these issues play out, including fentanyl. I could imagine that
(47:17):
it could become an issue UH in that free trade
discussion unless we make some progress before that, which of
course is challenging. But maybe that's a reason to really
get on this and see what we can do to
strengthen that engagement with the Mexicans, particularly around the corruption challenge.
(47:38):
And I know you've you've outlined that in UH in
other UH UH discussions and in your testimony, really getting
into the corruption challenge in Mexico. What can we be
doing to engage with Mexico at this stage, What what
should we be asking them for UH And how do
(47:59):
we think about this in terms of, you know, addressing
these national security challenges but also preserving a trade relationship
that is pretty valuable.
Speaker 2 (48:09):
Extremely valuable. I mean, there's no question about it. I mean,
it's it's it's it's one of our it's not our
biggest partner worldwide, is Mexico and they are a partner,
and it's just that I think that with the new
administration coming in coming in or here, it's an opportunity
for a reset, but certainly between us and then to
collaborate and focus in on those criminal groups that really
(48:31):
impact both countries, because Mexico is also being targeted as well.
I mean it's not just the United States. The amount
of violence and homicides that takes place each year in
Mexico is directly attributed to cartel activity. So I think
and the way is that who's really behind the cartel
(48:52):
is the question?
Speaker 3 (48:54):
And I've said this before and.
Speaker 2 (48:56):
I'll continue to say it is for many many decades now,
long enforcement has been focused just on the cartel and
and and the criminal elements associates to those to those
big organizations.
Speaker 3 (49:08):
But who's really behind that?
Speaker 2 (49:10):
Well, there are there is corruption, and it is at
the local, at the state, and even at.
Speaker 3 (49:16):
Times at the national level.
Speaker 2 (49:17):
And I think that we as we as a country
have to look at that and really focus in on
it because taking down the cartel, they're always replaceable, but
when you have corrupt officials that are behind them and propping.
Speaker 3 (49:31):
Them up and supporting them.
Speaker 2 (49:32):
That's where we can We can certainly assist UH Mexico
to really get after that and uphold the rule of
law law because we both need each other, there's no
doubt about it. And they and they are strong partners,
and we've had a history of success in Mexico collaborating
with our counterparts in Mexico. So so it's an interesting time.
(49:53):
I for one, think that it is a possibility for
before a reset and change. I do believe that President
Shaibam certainly respects the rule law and wants to you know,
pursue these criminal, bad actors that have impacted their country. Yeah.
Speaker 1 (50:13):
I actually think amidst all of these challenges, there's there's
a huge opportunity to rethink the border. And you know,
we talk about the North American free trade environment as
the leading trade block in the world. It's democratically driven.
Mexico is now our number one trading partner, and yet
we have a border that doesn't reflect the complexity of
(50:38):
that relationship or the opportunity. Uh maybe this is the
time to really push for that twenty first century border.
And you know, maybe the Fennel challenge gives us more
opportunity to get that message moving in the right way,
and thinking about the infrastructure needed on both sides of
the border, not only to dress that issue, but to
(51:01):
ensure that legitimate trade is facilitated the way that it
needs to be. You know, this is something we faced
after nine to eleven. I was at DHS during that
time working on some of the early programs like CTPAD
and the Container Security Initiative, and at that point we
were looking for the for the bomb in the box
and some of the legacy threats, particularly around narcotics. I
(51:24):
think took a bit of a back seat during that
time as we thought about the technology needed to address
the terrorist threat. But here we are now twenty years later,
with some of the same challenges at the border, but
trying to interdict the smallest of pills that are coming
in on us person. You know, it's it's really quite
(51:48):
a transformation. Not that we don't have a terrorist threat,
we do, but now we have something that is having
a massive impact when we think about all the all
the lives lost in America.
Speaker 2 (52:02):
Yeah, the border is absolutely integral to national security. I mean,
there's no question about it, but that encompasses many different things,
so it's not only terrorism, but.
Speaker 3 (52:12):
It's also drug trafficking.
Speaker 2 (52:14):
From a Mexican perspective, it's guns going south, and so
it is mutually beneficial to have a.
Speaker 3 (52:21):
Strong border in that regard.
Speaker 2 (52:24):
And I think that, you know, again, this isn't the
opportunity now to do that with a new administration, But
I think going backwards and further upstream, there's other areas
that we can collaborate and share information intelligence to go.
Speaker 3 (52:40):
After these bad actors that.
Speaker 2 (52:42):
Impact Mexico, for example, Chinese organized crime. It makes sense
for the Mexican government to want to pursue them and
hold them accountable just as much as it does for us.
And so that's an area that can immediately change overnight
that we are both focused in on these networks that
are working internationally in Mexico to bring precursor chemicals for
(53:07):
production of fennel.
Speaker 1 (53:08):
Yeah, what advice would you give financial institutions that are
trying to get a handle on these challenges? What would
be your top one or two recommendations?
Speaker 2 (53:20):
So my number one recommendation would be to invest in
your compliance. You know, I think more often than not
that's kind of like a secondary, oh, you know, to
regulatory responsibility. But I think, as history has proven, it
has to be a priority.
Speaker 3 (53:37):
For any banking institution.
Speaker 2 (53:39):
It has to be you have to know your customers,
you have to know if you're being exploited by criminal elements.
You have to collaborate with law enforcement, with Treasury, and
I think that the more you get in front of
that problem, the better, the safer.
Speaker 3 (53:57):
That you as a banking institution will be.
Speaker 2 (54:00):
And it goes back to my original statement, it's better
to be on an offense than to be playing defense.
I think that would be and that makes the most sense.
It's just a matter of when, if not, they are
not utilizing your branches, your banks to move millions of dollars,
(54:20):
and I think it's an opportunity to invest in compliance
and to and collaborate with the government.
Speaker 1 (54:27):
Great I thought we might end on a story. You
must have so many of them across your incredible career.
And also I want to just take a moment to
say thank you for your service to our country. You're
an incredible public servant and we're lucky that we had
you fighting the fight and now you're continuing to do that.
(54:48):
I know you were involved in the capture of l
Chapo both times and I thought it might be fun
to just end on that story and for you to
talk a little bit about the capture, the escape, and
then the recapture of this famous cartel figure.
Speaker 3 (55:08):
So the capture of El Choppo.
Speaker 2 (55:11):
Whenever I talked about El Choppo, what really stood out
to me most was the fact that you had fourteen
different agencies willing to put the egos aside and to
share intelligence those agencies for the sole purpose of going
after El Choppo. And what most people don't know is
(55:32):
that we weren't only going after El Chapo. We were
also going after his partner a mile at the same time.
Speaker 3 (55:38):
And so when we.
Speaker 2 (55:40):
First started investigation, many people didn't think that we could
do it because he was bigger than life. I mean,
he was in Forbes for being worth ten billion dollars.
He had this aura of untouched, untaught, being untouchable.
Speaker 3 (55:57):
And we put a team together and.
Speaker 2 (55:59):
For years, for about two years, all we did was
just build, build, build the investigation to the point where
we infiltrated his inner circle and eventually launched the operation
and we caught him.
Speaker 3 (56:15):
I mean, it took some time and it was a challenge.
Speaker 2 (56:17):
It wasn't easy, but I think really what stood out
for me the most was working with Mexico, working with
the Mexican Marines, working with all the US agencies, and
there was no there literally was no ego. Everyone said, Okay,
this is what I have, this is what I could
bring to the table. And what we realized is everyone
(56:39):
had a piece of the picture, and when you put
that together, he had clarity. So we were able to
infiltrate his inner circle and that's what ultimately won the
day and allowed for us to capture him. Now, that
was in twenty fourteen, early twenty fourteen. He escaped in
July of twenty fifteen, walked out of walk out, walked
(57:01):
out of a one point two mile long tunnel or
he was on a motorcycle and it took about ten
months to build that tunnel, and and he flew right
up to the mountains of Cinelower shortly thereafter. That was
disheartening because we knew what it took to really go
after in the first time, but we didn't quit. So
(57:24):
we brought the team back, that same team pretty much
from the first go around, same number of organizations, and
within about six weeks we were back into him after
his escape.
Speaker 3 (57:36):
So it took us two years to first go around.
It took us.
Speaker 2 (57:38):
About six weeks to get back into him because we
already built we already mapped out everyone around him, so
we knew who was in his inner circle, and so
we were already tracked him. About six weeks later we
launched an operation to go get him. He evaded us
for about two weeks. We were chasing him in the
in the in the jungles, in in Durango, in Mexico,
(58:02):
and eventually the Mexican Marines had a brilliant idea and
they wanted to flush him out. They knew that well,
we knew that he was up in a certain area
of Siniloa, up in the mountains. So the Mexican Marines,
and it was really their brilliant idea was We're just
going to go to every ranch and.
Speaker 3 (58:19):
Put pressure on them.
Speaker 2 (58:21):
Eventually they forced them out in the mountains down into
the city of Los Mochis and they captured them.
Speaker 3 (58:27):
And so that was.
Speaker 2 (58:30):
To me, that also kind of opened up the door
for a methodology of how we can collaborate with Mexico
and with our own agencies for any mission.
Speaker 1 (58:41):
Ray Donovan is a patriot, a noble public servant and leader,
and he's absolutely right. In order to counter the opioid
crisis in this country, we need the collaboration of our
government agencies, the collaboration of other countries, and the collaboration
of all of us. Not only do we need a
whole of government approach to countering the fentnel crisis, but
(59:02):
we also need a whole of industry approach, including the
financial institutions, messaging platforms, money transmitters, and alternate payment systems
that are compromised every single day. I thank Ray for
his public service and for joining me for this critical conversation.
It's time to rise to the challenge and dismantle these
criminal networks. I'm Moline Dozinski and this is coercive capital
(59:27):
on the illicit Edge network.
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