The Nexus of Narcotics Trafficking and Dirty Money

This week the US Senate Caucus on International Narcotics Control held hearing on the federal response to the drug overdose epidemic. John and Elliot discuss key themes of the hearings, interesting elements of the testimony, and insights into how the traffickers are moving their ill-gotten gains.

The Nexus of Narcotics Trafficking and Dirty Money TRANSCRIPT

Elliot Berman: John, how are you this week?

John Byrne: Hi, Elliot.

I imagine you're doing good. The Milwaukee Bucks are the MVP, congrats.

Elliot Berman: Thank you. I actually remembered the championship 50 years ago. I got a chance to see a game in Phoenix and a game here in Milwaukee in the series. So lots of exciting things are happening.

The city, as you can imagine, is just really excited about the whole thing and we'll see what they can do next year. They're an interesting team, so it'll be fun.

John Byrne: That's always the case, right? They win a championship, and can you do it again? I'm sure most will savior this for at least the next couple of weeks.

Elliot Berman: Yes, absolutely.

This week the Senate caucus on international narcotics control held a hearing. Did you see any information about that?

John Byrne: I did. A good close colleague of both of ours, Steve Gurdak, who's done some content for us, is from the Northern Virginia SAR review team.

He was asked to testify. While this was about dealing with drug overdose epidemics, opioid issues, and all of that, he was asked to talk about a key component of that, and that's obviously the financial side. That became relevant in addition to caring about what's going on with issues that deal with drug overdoses.

The chairman is Senator Sheldon Whitehouse, from Rhode Island, and one of the things he said in his opening comments is that, as they're trying to grapple with this continued challenge is they want to figure out ways to attack the financial networks drug traffickers utilized.

As you and I both know, money laundering, drug trafficking, terrorism, there's a financial footprint component that, if you can disrupt, can be helpful to deal with the underlying crime.

Elliot Berman: One of the things that tells us, is that there will be another group in the Senate and in the law enforcement community who are going to be interested in how the anti-money laundering act regulations come out in some cases because they are an interested constituency because of the goal of disrupting the financial component of this illegal act.

John Byrne: Right. Senator Whitehouse has been a pretty strong supporter of the bank secrecy act. And as Steve told us offline, after the hearing between Whitehouse and Senator Chuck Grassley, they're going to have further hearings dealing with this component. I think there's going to be more here and separately.

I will say that we've talked to our house and Senate folks that worked on the AMLA law, and they say that there's going to be additional legislation to bolster parts of that as well. So, a lot for our community to be paying attention to. But I did want to just quickly highlight a couple of things that Steve talked about in his testimony and not super surprising, but very interesting from how we sort of view the problem.

He talked about how with traffickers and criminals, there's this view that they're using cryptocurrency a lot. And he, he sort of pushes back on that. He said, yeah, it's happening. But he also said that from his perspective, he thinks, that as he calls it, cash is still king.

So, while there is, you know, Cyber Currency and Virtual Currency issues that are drawing headlines, which they should, and we know that central banks here and around the world are paying attention to it. He said he's got statistics that show that there's been a 44% increase in SAR filings in the past two years for structuring.

And he believes that's a pretty clear point that cash is still being utilized for these crimes. I'm not completely surprised, but like I said, he's got statistics to really emphasize that.

Elliot Berman: Yeah. Which is certainly contrary to the overall view about the economy becoming more and more cashless. That doesn't mean that the whole economy is that way. This is a part of the economy that I guess if it's going to lag, you'd sort of expect it to lag because the view is it's less traceable. Although, you do have to figure out how to move it around and spending large amounts of it, it's becoming more and more problematic.

John Byrne: Right. And, the other thing I've mentioned, you know, and I know, but something that Steve has been a strong proponent of is, training both law enforcement and financial institutions better techniques to do investigations. And so, he believes that the new rule is, if you can expose money laundering financial crime activities, you need more proper training on all sides to do that.

And that's something I know we at RightSource are going to be working on in future programming. He gets frustrated and doesn't quite understand how to ask for certain bank records. How do you do search warrants and subpoenas? And he thinks there could be better both cooperation and collaboration in terms of training between both sides.

Elliot Berman: That has been a chronic problem for literally as long as I can remember in my professional career. Whether it's local or federal, wanting help from the bank and not knowing enough about how the bank works. I used to get subpoenas or review subpoenas, and this was back in the day when many, many records were paper, and you'd call them up and say, so, you know, this is like four train car loads of boxes if we actually copied all this stuff. If you could kind of narrow down what you're looking for, we might be able to help you, but they just didn't understand how the bank worked. So, the solution was asking for any and all.

So, I think he's exactly right, whatever the industry can do to help. I think it is a good thing and whatever law enforcement can do to help share their investigative processes. Again, never give away the secret sauce. I understand that.

So, the banks can really be thoughtful, and also that would bleed over into how to write better SAR narratives so that you can flag the right transaction.

John Byrne: I think that's right.

So, for more information on this, it's the Senate caucus on international narcotics control. The hearing was on the federal response to the drug overdose epidemic. It's on that committee's website. All of the statements of the witnesses plus Steve's, and there'll be further information going forward.

Elliot Berman: John and I do This Week in AML every week, and you can find it on Spotify or wherever you get your podcasts. On our website, there's a lot of other content that we do on all kinds of topics related to financial crime. And we'd encourage you to take advantage of these resources that we produce.

So, John, have a good rest of the week, and I will talk to you next week.

John Byrne: Take care of Elliot. See you.

Elliot Berman: All right. Bye-bye.