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The Comprehensive Crime Control Act of 1984 added an attempt provision to 31 United States Code 5316(a), thus resolving this problem, so section 6 of H.R. 1474 is now unnecessary.

Turning now to H.R. 4573, introduced by Congressman Pickle, it is aimed at overcoming problems of smurfing, or structuring monetary transactions by breaking up what is essentially one transaction into a series of smaller transactions, to avoid reporting requirements under the Bank Secrecy Act.

In my prepared statement, I set out a number of recent cases that have severely hampered our ability to attack smurfing. Clever defendants seem to be able to stay one step ahead of the Treasury and Justice and the Bank Secrecy Act.

Justice and Treasury are working closely to close some of these regulatory loopholes, but there is just a little bit that can be done by regulation.

Legislation is clearly necessary. H.R. 4573 also deals with smurfing problems by prohibiting the structuring of financial transactions for the purpose of evading reporting requirements.

We endorse this bill as it relates to the structuring problem, but let me emphasize that we do not see it is a substitute for H.R. 2785. Filing reports on monetary transactions are important and at the moment changes in these reporting requirements are needed.

But punishing people who fail to file reports to live up to these requirements, we are approaching the problem in a very indirect way.

Turning to H.R. 4280, I note that, among other things, it would amend the Bank Secrecy Act to eliminate the discretion presently granted to Treasury to determine when currency transaction re ports must be filed by financial institutions and persons who participate in transactions with financial institutions.

Presently, 31 United States Code 5313 provides that they must be filed on an amount, denomination, or amount and denomination, or under circumstances the Secretary prescribes by regulation. The present regulation sets the amount at $10,000 or more.

However, the Secretary could lower that amount, and several ideas are presently being considered under which such a reduction could to be used to deal with the structuring problem I talked about earlier.

H.R. 4280 would eliminate this possibility by setting the amount above which a CTR must be filed at $10,000 or more. Consequently, we oppose this bill.

Mr. Chairman, rather than continue to take up your valuable time with detailed references to differences in these bills, we would be willing to answer any questions you might have on our state ment or anything else we might be able to help you with.

[The prepared statement of Mr. Trott on behalf of the Department of Justice can be found in the appendix.)

Chairman ST GERMAIN. Now we will hear from Mr. Coward.



Mr. COWARD. Thank you, Mr. Chairman, members of the subcommittee, for the opportunity to appear here today.

I would like to take a few moments since DEA has not had the opportunity to appear here before, to briefly acquaint you with our agency, what we do, and a little bit about how we do it, and then get into the money laundering operation.

DEA is a fairly small agency with a large mandate. We have three principal functions. No. 1, among those is enforcement of the Controlled Substances Act, and we do that with the FBI, and with other agencies. DEA is also responsible for maintaining an intelligence network, programs which service the Federal enforcement community, State and local communities, and to a large degree supports our counterparts overseas. Third, we have a diversion investigative arm which is responsible for the investigation and registration of licit producers of drugs, and the diversion from those licit producers to illicit markets.

Our agent strength is 2,500 agents. We are spread fairly thin, 120 offices in the United States, and offices in some 42 countries overseas.

We stay busy.

Chairman ST GERMAIN. Mr. Coward, you state that your work force is now at some 2,500?

Mr. COWARD. Another roughly 2,000 support personnel.

Chairman ST GERMAIN. 4,600. What was it 10 years ago, and 5 years ago?

Mr. COWARD. I don't have the exact figure, but it was substantially less.

Chairman ST GERMAIN. Well, let me rephrase the question.

Has your work force increased. remained stable, or decreased in the last 5 years?

Mr. COWARD. Gradually increased, not a remarkable increase in the last 5 years, but in the hundreds of agents, at least.

, Chairman ST GERMAIN. Now, did this increase occur along with or concommitant with increased duties, or have the mandates-has your mandate remained constant?

Mr. COWARD. Our mandate has been fairly constant. It is just that the drug trafficking has continued to increase because of the

Chairman ST GERMAIN. This last line then, drug trafficking would have increased in the past couple-during a 5-year period?

Mr. COWARD. Certainly.

Chairman ST GERMAIN. If you had a graph, by what percentage would drug trafficking have increased in the past 5 years, for instance?

Mr. COWARD. That would be difficult to graph, sir, because there is no way we can make an accurate statement as to the level of the drug trafficking.

We know our efforts, and we know what they have produced.

Chairman ST GERMAIN. Last time: Has your increase-or has the increase in your work force paralleled what you feel the increase in drug trafficking has been?

Mr. COWARD. In that they have both escalated, yes, sir. Whether or not it has been pro rata, I am not sure, because we don't have an accurate handle on it.

Chairman ST GERMAIN. You don't have a personal opinion?

Mr. COWARD. The drug trafficking is endless. We need all the people we can get in order to attack the problem.

Chairman ST GERMAIN. Your work force has increased in the past 2 or 3 years by how many hundred?

Mr. CoWARD. Several.
Chairman ST GERMAIN. 1,000?
Mr. COWARD. No, sir.
Chairman ST GERMAIN. 500?
Mr. COWARD. Probably, or slightly less.
Chairman ST GERMAIN. Slightly less?
Mr. COWARD. Yes, sir.
Chairman St GERMAIN. Thank you.

Mr. COWARD. In any event, our 2,500 agents do stay busy. Last year, we made 15,000 arrests, and we seized 300 or so clandestine laboratories in this country. We seized 38,000 pounds of cocaine, 1.6 million pounds of marijuana, 980 pounds of heroin, and we seized more than $250 million in trafficker assets, so we do stay busy.

In addition to these principal programs, DEA assists and supports other Federal, State, and local agencies and foreign governments with training, crop eradication programs, and other nonenforcement programs.

We are encouraging increased forfeiture legislation among all the jurisdictions we work with, because it is a good technique to attact the drug trafficking problem.

Overseas, we work under the direction of the Secretary of State and U.S. Ambassadors. Also overseas, in our role we try to deal with groups of nations as much as possible.

We work very closely with Interpol, the United Nations, regional geographic organizations, and principally with our counterparts, the law enforcement officials of those countries. We seem to share a common bond, and we work very well on a working level basis.

Today's drug traffickers are truly international entrepreneurs and, because of this, international cooperating in investigating cases, obtaining evidence, and coordination prosecutions is crucial to DEA and Justice Department enforcement efforts.

DEA has encouraged bilateral mutual legal assistance treaties, other bilateral agreements, and a number of other cooperative arrangements to provide us with better intelligence and with evidence which might otherwise be unavailable because of bank secre

cy laws.

Most of our overseas work is man-to-man, police officer-to-police officer. We are in the trenches with them.

As you requested, I would like now to expand a bit on the subject of money laundering of drug profits and the Federal Government's seizure and forfeiture of drug trafficker assets.

Financial investigations leading to the seizure and forfeiture of assets are a crucial part of narcotics enforcement. The Comprehen

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sive Crime Control Act of 1984 makes seizure and forfeiture of the profits and assets generated by trafficking in narcotics important weapons in the Government's war on drugs.

Because of the enormous profits being reaped by drug traffickers today, the Drug Enforcement Administration has greatly increased its emphasis on programs to separate traffickers from their illgotten gains.

Experience has shown that regardless of the size of an illegal drug operation, the arrest of an organization's members, or even its leaders, will not necessarily put the operation out of business.

There are always associates, lieutenants, or family members ready to continue operations while the boss is in jail; and the boss may even be calling the shots from behind bars.

We have found, though, that when we take away the assets from an organization, we have virtually rendered it impotent. They have to find new routes. If we can eliminate the traffickers, if we are able to identify and successfuly prosecute them, and then take away their assets, the chances for having success are far greater.

We are no longer limited to taking vehicles, as we were for many years. We take cars, airplanes, bank accounts, race horses, ongoing businesses.

We work closely with the Marshal Service, who now has the responsibility for running the Asset Forfeiture Program within the Department of Justice. They handle the assets during pendency of the forfeiture proceedings, until the property is sold.

We work with FBI, IRS, Marshal Service and others in initial investigations and in the tracking of assets.

IRS is working on violations of the tax laws at the same time, and we have found that this cooperative arrangement is to everyone's benefit.

Frequently, we will work together to make a case against the same organization, and in those instances, if for whatever reason, the civil forefeiture under title XXI is not successful, the IRS is able to come behind with the tax statute and

still keep the property from going back into the hands of the traffickers and their organizations.

In 1985, DEA seized cash and other property valued in excess of $250 million, and we plan to do more. We are putting considerably more emphasis on this program. We are forming teams of agents in each of our divisions; we currently have three in place and four more are being formed as we speak.

We would hope that the rest of our field divisions have teams in place soon. The prototype effort in San Diego in the last several years has shown astounding results with a far greater percentage of trafficker assets being seized and forfeited.

We are trying to proliferate this program now. These agents are specially trained. They spend a great deal of time developing the expertise necessary to track these assets, and to assist the U.S. attorneys in preparing for the forfeiture.

While DEA is pleased with the progress of its Asset Removal Program, we are anticipating our success is going to create additional problems. As we become more successful in seizing trafficker assets we can only suspect the traffickers will become more sophisticated in laundering the proceeds of their enterprises, in trying to put them outside our reach. As we find new methods being employed we have to develop techniques to counter these.

The pending legislation, H.R. 2785, will certainly go a long way to stopping these new techniques. In the past, without any specific legislation directed at money laundering, there were certain people within an organization which we simply were not able to get, because they were insulated from the drugs.

It was difficult to draw the nexus and although we knew they were involved in the laundering of the money. This legislation will solve that problem. Likewise, to facilitation part of the statute, or of the bill, will allow us to get a better handle on the smurfing situation, and on some of the other folks that handle these transactions for the traffickers.

Again, they have generally been unavailable to us under other statutes. We are anxious, not because the smurfs are big time drug traffickers-frequently, they are simply low-paid lackeys doing the work for the traffickers—but if there is a criminal charge to which they are accountable, not only are we able to prevent them from continuing their activities, but they might also become more willing witnesses against higher-ups in the organization.

We look forward to that provision. Another part would be the clarification of the ability of the banks to provide information to us in the way of investigative leads when they notice suspicious activity.

There is some uncertainty on the part of bankers as to what they can and cannot provide to us under the current legislation. Clarifying that would be useful.

The techniques of money laundering, I am sure you have heard about before, and there are as many as there are drug traffickers. They may be very simple, such as exchanging lots of little bills for few small ones or cashier's checks, by using smurfs.

In some cases, they use dozens and dozens of shell corporations, brokerage accounts and all manner of financial transactions.

One of the examples which I am sure you heard of before, is the Orozco case. He was convicted along with several others in May 1983 on drug conspiracy charges. Over a 4-year period he deposited $150 million in cash in some 18 bank and currency exchange accounts, mostly in New York City, and then transferred these funds to other accounts in the United States, Panama, and the Cayman Islands.

Chairman ST GERMAIN. Regarding the Orozco case, did you say he was convicted?

? Mr. COWARD. Yes, sir, in May 1983. Chairman ST GERMAIN. He had laundered how much money? Mr. COWARD. $150 million over a 4-year period. Chairman ST GERMAIN. How much of that was recovered? Mr. COWARD. I am sorry, I don't know the figure. Chairman ST GERMAIN. Do you know what his sentence was? Mr. Coward. No, I am sorry, I don't have it. Mr. TROTT. Mr. Chairman, we can provide that for the record, if

you wish.

Chairman ST GERMAIN. You don't have a ballpark figure?
Mr. TROTT. No.
Chairman ST GERMAIN. Was it 10 years?

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