DEA Congressional Testimony
April 24, 2002

Drugs, Money and Terror

As the tragic events that occurred on September 11, 2001, and the daily terrorist acts carried out by groups in Colombia demonstrate, some terrorist organizations' dependence on and relation to international drug trafficking poses a threat to the national security of the United States and every democratic nation. These groups do not hesitate to use violence and terror to advance their interests, all to the detriment of law-abiding citizens.

photo - Congress logo
U.S. Congress

Terrorist actions continue to plague Colombia. On April 12, 2002 the Revolutionary Armed Forces of Colombia (FARC) fired an explosive rocket in an attempt to destroy either an RCN television broadcasting facility or a nearby ETB electrical facility in western Bogota. On April 14, 2002 FARC urban militias exploded a bomb in Barranquilla in a failed attempt to kill front running Colombian presidential candidate Alvaro Uribe. The bomb killed three civilians, and 13 people were injured in the attack.

photo - Administrator Hutchinson
Administrator Hutchinson

Because of DEA's unique position of maintaining offices around the world, our resources will continue to focus on significant drug trafficking organizations, including those who engage in terrorist acts. The current worldwide drug and terrorism situation demands a comprehensive and strategic approach. One of DEA's priorities is the implementation of a Global Heroin Strategy to target, investigate, disrupt and ultimately destroy heroin trafficking organizations having the most impact on the United States. This program has developed strategies for the four source zones in the world: South America, Mexico, Southeast Asia, and Southwest Asia.

photo - Chairman Henry Hyde
Chairman Henry Hyde

Chairman Hyde, Ranking Member Lantos, and distinguished members of the committee, it is a pleasure for me to appear before you for the first time in my capacity as the Administrator of the Drug Enforcement Administration (DEA). International drug trafficking, terrorism, and money used to finance terrorist acts are subjects of deep concern to DEA, all Americans, and every democratic nation in the world. The committee's leadership and support in our fight against these narco-trafficking organizations is deeply appreciated. I look forward to a successful, productive, and cooperative relationship with this committee on this most important issue.

I appear before you today to testify on the nexus between international drug trafficking, terrorism, and the money that finances narco-terrorist groups. DEA has directed enforcement and intelligence assets to identify, investigate, and dismantle all organizations, including terrorist groups, engaged in the drug trafficking trade.

DEA defines narco-terrorism as a subset of terrorism, in which terrorist groups, or associated individuals, participate directly or indirectly in the cultivation, manufacture, transportation, or distribution of controlled substances and the monies derived from these activities. Further, narco-terrorism may be characterized by the participation of groups or associated individuals in taxing, providing security for, or otherwise aiding or abetting drug trafficking endeavors in an effort to further, or fund, terrorist activities.

DEA targets the powerful international drug trafficking organizations that operate around the world, which employ thousands of individuals to transport and distribute drugs to American communities. Some of these groups have never hesitated to use violence and terror to advance their interests. While DEA does not specifically target terrorists, we will target and track down drug traffickers and drug trafficking organizations involved in terrorist acts.

My testimony will focus on the narco-terrorist organizations and the illegal drug profits used to support their activity.

South America
The Colombian Narco-Terrorist Threat

photo - National Liberation Army
National Liberation Army

Colombia's three major terrorist groups are the FARC and the National Liberation Army (ELN), and the United Self Defense Forces of Colombia (AUC). The FARC membership is estimated to be 12,000 to 18,000 personnel and the ELN maintains 3,000 to 6,000 personnel. The FARC, which is the best-trained and equipped terrorist group in Colombia, asserts influence and varying degrees of control on large areas of Colombia's eastern lowlands and rain forest, which are the primary coca cultivation and cocaine processing regions in the country. The ELN operates primarily along Colombia's northeastern border with Venezuela and in central and northwestern Colombia, including Colombia's cannabis and opium poppy growing areas.

map of South America

photo - United Self Defense Forces of Columbia
United Self Defense Forces of Columbia

Right wing "self-defense groups" emerged in Colombia during the 1980s in response to insurgent violence. Hundreds of illegal self-defense groups-financed by wealthy cattle ranchers, emerald miners, coffee plantation owners, drug traffickers, etc.-conduct paramilitary operations throughout Colombia. The loose coalition known as the AUC (Autodefensas Unidas de Colombia) is the best known of these self-defense groups and has an estimated strength of 10,500 personnel.

DEA has established that these terrorist groups are involved in various aspects of drug trafficking activity including but not limited to: raising funds through extortion or protection of laboratory operations and clandestine airstrips; encouraging coca planting and discouraging alternative development; purchasing, transporting, and reselling cocaine within Colombia; and the distribution of cocaine to international drug trafficking organizations.

In late February 2002, peace negotiations between the Government of Colombia and the FARC broke down after the hijacking of an Avianca flight and the subsequent kidnapping of a Colombian Senator and others who were on board the aircraft. After three years of failed peace negotiations between the Colombian Government and the FARC, President Andres Pastrana ordered the Colombian Armed Forces to enter the FARC safe-haven and re-establish government control.

photo - Columbian National Police
Columbian National Police

In March 2002, the Colombian National Police (CNP), with the support and assistance of the DEA Bogota Country Office, conducted seizures of several cocaine hydrochloride and cocaine base laboratories located in the former FARC-controlled demilitarized zone located along the Rio Guayabero in the Meta Department. In addition to numerous items of documentary evidence, approximately seven tons of cocaine hydrochloride and cocaine base and were seized by the CNP.

Document exploitation experts reviewed items seized from two of the laboratories and identified documents related to several FARC Fronts. Documents seized included production ledgers, records showing the purchase of chemicals, and receipts of cocaine base purchases. The receipts seized from one of these laboratories bear stamps from three FARC Fronts indicating that members from these Fronts personally sold cocaine base to laboratory operators.

Production estimates indicated one of the seized laboratories was producing an average of 100 kilograms of cocaine per day with a maximum production rate of over 500 kilograms per day.

photo - Attorney General John Ashcroft
Attorney General
John Ashcroft

On March 18, 2002 Attorney General John Ashcroft and I announced the unsealing of a Federal indictment against seven defendants, three of whom are members of the 16th FARC Front. This case, conducted by DEA's Bogota and Brasilia, Brazil Country Offices, the government of Colombia, with assistance from the Department of Justice Criminal Division Attorneys, is the first time that members of a known terrorist organization have been indicted in the United States for their drug trafficking activity.

This indictment charges that between 1994 and 2001, the commander of the 16th Front, Tomas Molina Caracas and other members of the 16th Front engaged in drug trafficking from the town of Barranco Minas, a remote village in Eastern Colombia near the Venezuelan border. The indictment alleges that Molina collected cocaine processed in laboratories along the Guaviare River and sold it to international cocaine traffickers. Cocaine obtained from Molina was ultimately transported to the United States, Brazil, Suriname, Paraguay, Mexico, and Spain. In addition, the 1st, 7th, 10th, 39th, and 44th FARC Fronts delivered cocaine to Molina and the 16th FARC Front for the cocaine to be sold to international drug traffickers. According to the indictment, cocaine was sold in exchange for currency, weapons, and equipment.

photo - Revolutionary Armed Forces of Columbia
Revolutionary Armed Forces of Columbia

Colombia Terrorist Activity

Violent actions continue to be carried out by terrorist groups in Colombia, particularly the FARC and ELN. Recent terrorist actions conducted in Colombia include:

  • On April 11, 2002, FARC guerillas disguised as Colombian Army soldiers set off small explosions in downtown Cali, Valle Del Cauca. In the ensuing confusion, one CNP officer was killed and 12 members of the departmental assembly (local legislators) were kidnapped.
  • On April 12, 2002 a FARC Urban militia unit fired an explosive rocket in an attempt to destroy either an RCN television broadcasting facility or a nearby ETB electrical facility in western Bogota.
  • On April 14, 2002, FARC urban militias exploded a bomb in Barranquilla in a failed attempt to kill front running Colombian presidential candidate Alvaro Uribe. Three people were killed and 15 people were injured in the attack.
  • On April 15, 2002, the Colombian Army and Air Force reportedly destroyed a small private aircraft bearing Venezuelan markings that was equipped to drop bombs. Colombian military intelligence reported that it was part of an attempt to attack the capital in the department of Arauca.
  • On April 21, 2002, the FARC kidnapped the governor of Antioquia Department, the former Colombia Minister of Defense, an American citizen and several priests while the group was conducting a march protesting violence in Colombia. The FARC continues to hold the governor and former Minister of Defense.
  • According to the Government of Colombia, the FARC and ELN committed 260 terrorist attacks against the Covenas oil pipeline. The results of these terrorist attacks are equivalent to 11 times the spillage of the Exxon Valdez. These acts cost the Colombian government millions of dollars in revenue.

The violent activities of the FARC and other groups have not been limited to the country of Colombia. Information from the region indicates the FARC has become a destabilizing force. The FARC's violence and coca processing activities have spread to Panama. Venezuela, too, is experiencing increased violence, causing some cattle ranchers to hire additional security personnel to counter the FARC's efforts.

In addition, in 2001, three members of the Irish Republican Army (IRA) were arrested in Colombia for collaborating with the FARC. The Colombian government asserts that the IRA members were training FARC members in urban terrorism. The three men have been charged with travelling on false passports and providing the FARC with weapons instruction.

In 2001, there has been increased reporting of suspected FARC drug trafficking activity in the Darien Province of Panama. Intelligence suggests that small-scale coca cultivation has resumed in the Darien Province border region and apparently is expanding. These reports of drug activity substantiate earlier unconfirmed sightings of limited coca cultivation in the Darien Province along the Colombian border in regions under the 57th FARC Front influence.

There have been reports of the FARC 57th Front incursions into Panama's Darien Province near Jaqué, the last sizeable village on the Pacific Coast north of the Colombian border. There have also been reports of clandestine laboratory activity in the Darien Province area; but as yet, there has not been ground verification. The guerilla tactics employed by the FARC in these areas inhibits ground action by law enforcement.

Islamic Extremists in the Triborder Area
Hezbollah and Hamas

photo - Hezbollah
Hezbollah
photo - Hamas
Hamas

The triborder area of Paraguay, Argentina, and Brazil continues to be a haven for Islamic extremists. The two major terrorist organizations in the triborder area are Hezbollah and the Islamic Resistance Movement known as HAMAS.

It is suspected that their illegal activities range from producing counterfeit U.S. currency to smuggling illegal substances through the triborder area. The situation in the triborder area highlights the ease with which terrorist organizations can infiltrate and assimilate in other countries and go relatively undetected for an extended period of time.

photo - Sendero Luminoso
Sendero Luminoso

Peru's Sendero Luminoso: The Shining Path

Sendero Luminoso (SL) is an extremely violent armed group that sought to overthrow the Peruvian government and establish a communist agrarian state from the 1980's to the mid 1990's. SL has historically operated from bases in remote regions of Peru that also held the main coca growing areas. DEA reporting indicates that the group has probably extracted revolutionary taxes from the cocaine base operators.

Basque Fatherland and Liberty (ETA)

The Basque Fatherland and Liberty (ETA) organization was founded in 1959 with the goal of establishing an independent homeland based on Marxist principles in several provinces of northern Spain and southwestern France. In November 1999, ETA ended a long period of cease-fire, resuming its campaign of bombings and assassinations, killing 23 individuals and wounding many more by the end of 2000.

Southwest Asia
Afghanistan, The Taliban, and Osama Bin Laden

photo - Osama Bin Laden
Osama Bin Laden

The Islamic State of Afghanistan is a major source country for the cultivation, processing and trafficking of opiate and cannabis products. Afghanistan produced over 70 percent of the world's supply of illicit opium in 2000. Morphine base, heroin and hashish produced in Afghanistan are trafficked worldwide. Due to the warfare-induced decimation of the country's economic infrastructure, narcotics have been a major source of income in Afghanistan.

U.S. intelligence confirmed a connection between Afghanistan's former ruling Taliban and international terrorist Osama Bin Laden and the al-Qa'ida organization. DEA has received multi-source information that Bin Laden has suspected involvement in the financing and facilitation of heroin trafficking activities. While the activities of the two entities do not always follow the same course, we know that drugs and terror frequently share the common ground of geography, money, and violence.

According to the official U.S. Government estimates for 2001, Afghanistan produced an estimated 74 metric tons of opium. This is a significant decrease from the 3,656 metric tons of opium produced from 64,510 hectares of land under opium poppy cultivation in 2000. Cultivation and production estimates for the spring 2002 opium crop differ widely, but even under the most conservative estimate, Afghanistan has the capability to return as one of the largest opium producers in the world.

The head of Afghanistan's provisional government, Hamid Karzai, supports the eradication of opium poppy cultivation. Interim president Karzai renewed the Taliban's ban on poppy cultivation and drug production in January 2002 and called upon the international community to support his efforts.

photo - Kurdistan Workers Party
Kurdistan Workers Party

Kurdistan Workers Party (PKK)

Historic DEA information indicates that the PKK members are involved in the taxation of drug shipments and the protection of drug traffickers throughout the Southeastern Region of Turkey and other areas of operation.

The United Wa State Army

Methamphetamine and heroin trafficking finances the efforts of the 20,000 strong United Wa State Army (UWSA). The UWSA exists primarily as a separatist organization, seeking autonomy from the central government in Burma. It funds its separatist activities by being the major international drug trafficking organization in the region. The UWSA is characterized as a narco-trafficking organization but is not deemed to be a terrorist organization at this time.

The Financing of Terrorist Networks with Drug Money

Narco-terrorist organizations in Colombia, Afghanistan, and other areas of the world generate millions of dollars in narcotics-related revenues to facilitate their terrorist activities. Tracking and intercepting the unlawful flow of drug money is an important tool in identifying and dismantling international drug trafficking organizations with ties to terrorism. The attacks carried out on our nation on September 11, 2001 graphically illustrated the need to starve the financial base of every terrorist organization and deprive them of drug revenue that is used to fund acts of terror.

photo - financing of terroist networks

In order to dismantle narco-terrorist organizations, one must not only arrest and prosecute the leaders of the organization, but also expose their supporting financial infrastructure and seize and forfeit assets acquired by them. The cells of terrorists are dispersed beyond the geographic boundaries of a specific country, much like international drug syndicates. Accordingly, DEA's approach to both the drug trade and the terror network must be equally global in scope.

ONDCP logo
Office of National Drug Control Policy

According to ONDCP, Americans spend $64 billion on illegal narcotics annually, most of it in cash. To avoid detection, these organizations have developed a number of money laundering systems in attempts to avoid financial transaction reporting requirements and manipulate facets of the economy unrelated to the traditional financial services industry.

The Black Market Peso Exchange System (BMPE) is a significant money-laundering system used by Colombian narcotics traffickers. The BMPE is a trade-based money-laundering scheme that handles billions of dollars in drug money annually. It is among the primary means by which cartels convert U.S.-based drug dollars into "clean" pesos in Colombia. The BMPE has a devastating impact on Colombia's economy by fostering a contraband trade that undercuts legitimate businesses and deprives the Colombian government of hundreds of millions in tax revenue. The exact size and structure of the BMPE system cannot be determined with any degree of precision. However, based on intelligence related information, it is believed that between $3 billion and $6 billion is laundered annually.

The BMPE process begins when a Colombian drug organization arranges the shipment of drugs to the United States. The drugs are sold in the United States in exchange for U.S. currency. This U.S. currency is then sold to a Colombian black market peso broker's agent located in the United States. Once the dollars are delivered to the agent of the Colombian peso broker in the United States, the peso broker in Colombia deposits the agreed upon equivalent in Colombian pesos into the organization's account in Colombia.

DEA's Bogota Country Office, in cooperation with the Colombian Department of Administrative Security (DAS), have created a Special Investigative Unit (SIU) that focuses their efforts on financial investigations and combating criminal organizations involved in illegal money laundering schemes. The SIU is comprised of elite law enforcement officers selected from within the ranks of the DAS. Each SIU member undergoes a strict "vetting" process, designed to ensure honesty and integrity and further, receives specialized investigative training. This SIU is headquartered in Bogota, but has the ability to respond to and investigate activities throughout Colombia.

  • The DAS/DEA SIU, working with the Special Operations Division, a multi-agency (DEA, FBI, USCS, IRS Criminal Investigators, and DOJ/Criminal Division) coordination and law enforcement intelligence analysis unit, was instrumental in the successful conclusion of "Operation Wirecutter". This operation was a multi-agency investigation targeting peso brokers operating in Colombia and represented the first time that U.S. authorities were able to combine undercover pick-ups of drug proceeds in the United States with investigative efforts by Colombian authorities to target money brokers. Thus far, the undercover investigation resulted in the arrest of 37 individuals -- 29 in the United States and 8 senior money brokers in Colombia. It is believed that the 8 Colombians arrested have a combined 50-years experience laundering drug money for the Colombian cartels. U.S. authorities also seized approximately 8 million dollars, 400 kilograms of cocaine, 100 kilograms of marijuana, and 6.5 kilograms of heroin.
  • In April 2002, the Bogota Country Office DAS/SIU, concluded Operation Broker I, II, and III. These operations resulted in the arrest of 53 Colombian nationals, seizure of four airplanes utilized to smuggle U.S. currency to Panama, as well as jewelry from Panama to Colombia, 36 kilograms of gold jewelry, 1067 kilograms of silver jewelry, $569,795 in U.S. currency, and 181,000,000 Colombian pesos. It is also estimated that approximately 10 million dollars real property in Colombia will be seized for forfeiture from defendants as a result of this investigation. The defendants were responsible for laundering approximately 200 million dollars through accounts associated with this investigation.

The Hawala system is an underground, traditional, informal network that has been used for centuries by businesses and families throughout Asia. This system provides a confidential, convenient, efficient service at a low cost in areas that are not served by traditional banking facilities. The hawala or hundi system leaves no "paper trail" for investigators to follow. In the United States, hawala brokers tend to own high-volume, primarily cash businesses that cater to immigrants. In this process, an individual gives a hawala broker a sum of money and asks that the same amount be delivered to someone in another country. The broker contacts, often through the Internet and e-mail, a hawala broker in the city where the money is to be delivered, and instructs that broker to deliver the money to the recipient. Consequently, funds are exchanged without physical movement of the currency. The brokers make money by charging a fee for their services.

DEA has targeted and will continue to target trafficking groups that are using the hawala system to further their drug trafficking activity.

The International Role of DEA

DEA maintains offices around the world; these offices are in a unique position to collect drug intelligence from human sources and contribute to the formation of more effective cooperative law enforcement relationships in their respective areas. The existence of a trusted cadre of counterparts such as Colombia's SIU is an invaluable asset for DEA in any arena of operations.

map of Bolivia
Map of Bolivia

With the support of the Congress, DEA has implemented its SIU program in nine countries to include Mexico, Colombia, Ecuador Peru, Bolivia, Brazil, Pakistan, Thailand, and the Dominican Republic. The SIU program has effectively enhanced international cooperation and institution building within the host government's infrastructure.

DEA Program Initiatives:

DEA is requesting in its FY 2003 Budget $4.1 million and 20 agents to strengthen resources for drug related financial investigations to enhance assets of domestic field offices, with emphasis on the financial hubs of New York, Miami, and Los Angeles. DEA has been successful in investigating and dismantling money laundering organizations, but we are limited in our resources. DEA must improve its ability to monitor and track the financial holdings and transactions of drug trafficking organizations, especially with the demonstrated nexus between the profits from drug trafficking, terrorist activities, and violence.

In the course of conducting daily investigations against international drug trafficking organizations, the DEA often uncovers information of other related crimes, including money laundering and the financing of terrorist activities. The President's FY 2003 Budget Proposal also includes $35 million and 73 positions (including 12 Special Agents and 33 Intelligence Analysts) requested in the Attorney General's Counter-Terrorism Fund to enhance DEA's communications interception and intelligence capabilities in support of agencies conducting counter-terrorism in America and overseas. An additional $6.5 million and 45 positions is also included in the FY 2003 Federal Bureau of Investigations' Budget to continue reimbursing DEA for its counter-terrorism support. This reimbursement began with the passage of the first counter-terrorism supplemental in FY 2002

The DEA Financial Investigations Section has personnel assigned as DEA liaisons to both the Financial Crimes Enforcement Network (FinCEN) and to the Federal Bureau of Investigation's Terrorist Financial Review Group, responsible for tracing terrorist-related monies.

The DEA Intelligence Division has temporarily created a six-person Intelligence Response Team that can deploy worldwide to provide intelligence support related to narco-traffickers and other trafficking groups. This intelligence support includes but is not limited to, source debriefings, document exploitation, and region analysis.

The current worldwide heroin situation demands that DEA respond globally and strategically. DEA has developed a Global Heroin Strategy to target and investigate heroin trafficking organizations having the most impact on the United States. This program has developed strategies for the four source zones in the world: South America, Mexico, Southeast Asia, and Southwest Asia. DEA has recently proposed a reprogramming of prior year funds totaling $35.6 million to significantly enhance our enforcement efforts targeting heroin in three of these regions: Southwest Asia, Southeast Asia and Colombia.

Operation Containment, which focuses on Southwest Asia, is a proposed DEA initiative which includes opening a DEA office in Kabul, Afghanistan and the expansion of existing offices in Asian and European cities.

To address Southeast Asian heroin, DEA is proposing the establishment of new offices in Kunming, Peoples Republic of China, and Vancouver, Canada, as well as the expansion of our offices in Beijing and Rangoon. The United Wa State Army is a highly trained ethnic group responsible for approximately 80 percent of the heroin produced in Southeast Asia. Most of Southeast Asia's heroin is shipped through Southern China's deep-water ports, and that which is destined for the United States typically enters the country through the Vancouver area.

To address heroin trafficking in South America, the program would establish a Bogota Heroin Group to initiate additional investigations against the major Colombian trafficking groups operating there.

This entire $39.6 million reprogramming proposal is currently before the House and Senate Appropriations Subcommittees for review. The timely support of this Committee for this reprogramming would be very helpful and greatly appreciated.

Conclusions:

Narco-terrorists challenge the flexibility and resilience of all law enforcement agencies. The Drug Enforcement Administration remains committed to identify, investigate, and destroy criminal and terrorist groups involved in drug trafficking. DEA will continue to work with our law enforcement partners around the world to improve our cooperative enforcement efforts against international drug organizations.

Thank you for the opportunity to testify before the Committee today. I will be happy to respond to any questions you may have at the appropriate time.

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