[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                       FOLLOW THE MONEY: THE CCP'S
                         BUSINESS MODEL FUELING
                          THE FENTANYL CRISIS

=======================================================================

                                 HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                          ILLICIT FINANCE, AND
                  INTERNATIONAL FINANCIAL INSTITUTIONS


                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 23, 2023

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 118-11
                           

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
52-389                     WASHINGTON : 2023                    
          
-----------------------------------------------------------------------------------     
 
                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas                EMANUEL CLEAVER, Missouri
TOM EMMER, Minnesota                 JIM A. HIMES, Connecticut
BARRY LOUDERMILK, Georgia            BILL FOSTER, Illinois
ALEXANDER X. MOONEY, West Virginia   JOYCE BEATTY, Ohio
WARREN DAVIDSON, Ohio                JUAN VARGAS, California
JOHN ROSE, Tennessee                 JOSH GOTTHEIMER, New Jersey
BRYAN STEIL, Wisconsin               VICENTE GONZALEZ, Texas
WILLIAM TIMMONS, South Carolina      SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
DAN MEUSER, Pennsylvania             STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
YOUNG KIM, California                SYLVIA GARCIA, Texas
BYRON DONALDS, Florida               NIKEMA WILLIAMS, Georgia
MIKE FLOOD, Nebraska                 WILEY NICKEL, North Carolina
MIKE LAWLER, New York                BRITTANY PETTERSEN, Colorado
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director
          Subcommittee on National Security, Illicit Finance, 
                and International Financial Institutions

                 BLAINE LUETKEMEYER, Missouri, Chairman

ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio, Ranking Member
ROGER WILLIAMS, Texas                VICENTE GONZALEZ, Texas
BARRY LOUDERMILK, Georgia            WILEY NICKEL, North Carolina
DAN MEUSER, Pennsylvania             BRITTANY PETTERSEN, Colorado
YOUNG KIM, California, Vice          BILL FOSTER, Illinois
    Chairwoman                       JUAN VARGAS, California
ZACH NUNN, Iowa                      JOSH GOTTHEIMER, New Jersey
MONICA DE LA CRUZ, Texas
ANDY OGLES, Tennessee
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 23, 2023...............................................     1
Appendix:
    March 23, 2023...............................................    43

                               WITNESSES
                        Thursday, March 23, 2023

Cassara, John A., Special Agent, U.S. Treasury (Retired).........     4
Grellner, Jason, Vice President, Healthcare, Evolv Technology....     9
Im, Donald H., Assistant Special Agent in Charge, DEA (Retired)..     6
Peters, Gretchen, Executive Director, Alliance to Counter Crime 
  Online (ACCO)..................................................    11
Realuyo, Celina B., Adjunct Professor, The George Washington 
  University Elliott School of International Affairs.............     8

                                APPENDIX

Prepared statements:
    Cassara, John A..............................................    44
    Grellner, Jason..............................................    79
    Im, Donald H.................................................    82
    Peters, Gretchen.............................................    85
    Realuyo, Celina B............................................    91

              Additional Material Submitted for the Record

McHenry, Hon. Patrick:
    Letter from Sheriff Darren Campbell of Iredell County, North 
      Carolina...................................................   109
Barr, Hon. Andy:
    Written statement of the Versailles, Kentucky, Police 
      Department.................................................   111
Kim, Hon. Young:
    Written statement of the Orange County Sheriff's Department..   112
Loudermilk, Hon. Barry:
    Written statement of the National Sheriff's Association......   113
Ogles, Hon. Andy:
    America First Policy Institute (AFPI), ``Fentanyl: The Deadly 
      Consequences,'' by Robert Law, Heidi Overton, Kristen 
      Ziccarelli & Abigail Chance................................   114
    America First Policy Institute (AFPI), Fact Sheet, ``How 
      Fentanyl Enters American Communities,'' by Kristen 
      Ziccarelli, dated March 2023...............................   134
    Written statement of the Williamson County Sheriff's Office..   135
    America First Policy Institute (AFPI), Written testimony of 
      Chad Wolf, Former Acting Secretary of the Department of 
      Homeland Security, and Executive Director, Chief Strategy 
      Officer, and Chair of the Center for Homeland Security & 
      Immigration at the America First Policy Institute..........   142
Waters, Hon. Maxine:
    Written statement of the Brookings Institution...............   148
    Center for International Policy Fact Sheet...................   174
    Written statement of the Center for International Policy.....   183
    Report from Global Financial Integrity entitled, ``Made in 
      China: China's Role in Transnational Crime & Illicit 
      Financial Flows,'' by Channing Mavrellis and John Cassara, 
      dated October 2022.........................................   199
    July 14, 2021, Testimony before the U.S. Senate Committee on 
      Finance by David M. Luna, Executive Director, International 
      Coalition Against Illicit Economics (ICAIE)................   314
    Email from Dr. Louise Shelley describing inserts for the 
      record.....................................................   334
    ``Fentanyl, COVID-19, and Public Health,'' by Dr. Louise 
      Shelley....................................................   336
    Written statement of Dr. John P. Sullivan and Dr. Robert J. 
      Bunker.....................................................   344
    Written responses to questions for the record submitted to 
      John A. Cassara............................................   350
    Written responses to questions for the record submitted to 
      Donald H. Im...............................................   357
    Written responses to questions for the record submitted to 
      Gretchen Peters............................................   365
    Written responses to questions for the record submitted to 
      Celina B. Realuyo..........................................   370
Peters, Gretchen:
    ``The Alliance to Counter Crime Online (ACCO) Section 230 
      Written Submission''.......................................   375
    ``Social Media's Deadly Drug Problem,'' by The Alliance to 
      Counter Crime Online (ACCO)................................   379
    ACCO photos of National Fentanyl Day Victims.................   389
    ACCO slides presented at hearing.............................   437

 
                      FOLLOW THE MONEY: THE CCP'S
                         BUSINESS MODEL FUELING
                          THE FENTANYL CRISIS

                              ----------                              


                        Thursday, March 23, 2023

             U.S. House of Representatives,
                 Subcommittee on National Security,
                               Illicit Finance, and
              International Financial Institutions,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2128, Rayburn House Office Building, Hon. Blaine 
Luetkemeyer [chairman of the subcommittee] presiding.
    Members present: Representatives Luetkemeyer, Barr, 
Williams of Texas, Loudermilk, Meuser, Kim, Nunn, De La Cruz, 
Ogles; Beatty, Gonzalez, Nickel, Pettersen, and Foster.
    Ex officio present: Representatives McHenry and Waters.
    Also present: Representative Fitzgerald.
    Chairman Luetkemeyer. The Subcommittee on National 
Security, Illicit Finance, and International Financial 
Institutions will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Today's hearing is entitled, ``Follow the Money: The CCP's 
Business Model Fueling the Fentanyl Crisis.''
    I now yield myself 5 minutes for an opening statement.
    As this committee is painfully aware, fentanyl is a poison 
that is afflicting every community in this country. This poison 
is synthetic opioid, 50 times more potent than heroin and 100 
times more potent than morphine. Just 2 milligrams equal to 10 
to 15 grains of salt is enough to be lethal. As our current DEA 
Administrator, Anne Milgram, has said, ``Fentanyl is the single 
deadliest drug threat our nation has ever encountered.'' And I 
share her assessment, which is why I chose to address it in our 
subcommittee's first hearing this Congress.
    In preparation for today's hearing, I consulted local law 
enforcement officials in Missouri, who painted a grave picture. 
In 2021, synthetic opioids, such as fentanyl, took the lives of 
1,374 Missourians. Despite all the facts, surprisingly, 
fentanyl remains a Schedule II narcotic, which is why I 
recently reintroduced the Stopping Illicit Fentanyl 
Trafficking, (SIFT) Act, to combat the skyrocketing amount of 
fentanyl-related deaths. Fentanyl trafficking has become 
synonymous with the Mexican cartels who exploited the Biden's 
Administration's lax enforcement in border security and 
immigration controls to pour this poison into our country.
    However, it is also vital that Americans understand the 
essential role that China plays in the fentanyl crisis. China 
is the primary source of the know-how and illicit materials 
that Mexican cartels use to manufacture lethal synthetic 
opioids. Moreover, despite the Chinese Communist Party's 
(CCP's) publicly-professed policy against the export of 
dangerous drugs for illicit use, the CCP supports the Chinese 
companies that export fentanyl precursors by offering them 
government benefits and preferential tax policies as generous 
as 10 to 13 percent rebates.
    Precursor chemicals from China are converted into powdered 
fentanyl in Mexico, which is then smuggled across the U.S. 
border to be pressed into brightly-colored pills designed to 
look like legitimate prescription drugs to appeal to kids, 
referred to by the DEA as, ``rainbow fentanyl.'' And no, this 
is not hyperbole. In August of 2022, the DEA released a 
statement entitled, ``DEA Warns of Brightly-Colored Fentanyl 
Used to Target Young Americans.'' When a pill that costs $0.13 
to make can be sold for $10, the cartels are making huge 
profits which, like illicit gains, must be laundered.
    Chinese professional money launderers have become adept at 
using underground banking schemes and networks of human assets 
to move illicit profits through the financial systems, 
commingling drug proceeds with remittances to China, and 
transferring funds to China using Chinese mobile banking apps. 
Given the gravity and scale of the situation, it is unclear why 
the Justice Department's top priority is not to stop this 
reverse opium war that China is perpetrating against us. While 
there are a lot of pieces to this enormous challenge, including 
our unsecured border, the flow of money is the lifeblood of 
fentanyl trafficking, and is where our committee can bring our 
experience and our expertise to bear.
    Our witnesses today will help us understand the fentanyl 
flows, and what we can do to ensure that our government has the 
authorities, capabilities, and, most importantly, the will to 
stop them.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentlelady from Ohio, Mrs. Beatty, for 5 
minutes.
    Mrs. Beatty. Thank you so much, Mr. Chairman, and thank you 
to the witnesses.
    Today, as you know, we are here to discuss the financial 
infrastructure that underlies the production and proceeds of 
illicit fentanyl, a drug that is devastating our communities 
and taking far too many American lives. Not only just the scale 
of this epidemic nationwide concerns me, but this is a matter 
concerning to me because of the huge impact in my home State of 
Ohio. CDC data shows that Ohio ranks in the top 4 highest drug 
overdose mortality rates in the country, and fentanyl-related 
substances make up nearly 80 percent of overdose deaths. Also, 
as you mentioned, Mr. Chairman, and I am sure we will hear from 
our witnesses, there is a growing number of children who have 
lost their lives to this.
    Over the last decade, fentanyl overdose deaths have rapidly 
grown as traffickers began mixing illicit fentanyl with other 
drugs like heroin, cocaine, and controlled prescription drugs. 
In too many instances, those taking the substance had no idea 
that fentanyl had been added, resulting in countless deaths. 
Studies show that fentanyl is now the number-one cause of 
deaths for Americans between the ages of 18 and 45, taking the 
lives of more than 70,000 Americans each year. Furthermore, 
synthetic drug overdoses disproportionately affect communities 
of color, with deaths rates rising significantly for Blacks, 
Latinos, and indigenous people, compared to their White 
counterparts.
    So, let's follow the money and the stem the flow of this 
illicit, deadly drug in our country. Following the money takes 
us to the origins of the supply chain in the People's Republic 
of China, the primary source of synthetic drugs and their 
precursors. Over the last decade, while claiming to cooperate 
with the United States, China has been overly-permissive in 
allowing its drug traffickers and chemical producers to thrive. 
So, I believe if we are going to save American lives, we need a 
global strategy to bolster anti-money laundering efforts to 
detect and disrupt finance streams wherever we can. We also 
need to shore up our efforts right here at home, so we are 
hoping to hear from our experts and members on this committee 
that we can do just that.
    But let me just say I am very concerned that we have 
proposed budget cuts to certain areas at Treasury, so, Mr. 
Chairman, I am asking all members on both sides to take a look 
at that. For example, we have proposed budget cuts to certain 
areas in Treasury, including the Financial Crimes Enforcement 
Network (FinCEN) and the Office of Foreign Assets Control 
(OFAC), the very offices charged with protecting our financial 
systems. And as ranking member on this subcommittee, in keeping 
this germane to the financial systems, I think it is quite 
appropriate for us to ask that we look at that because while 
they are protecting our financial systems from drug trafficking 
and other bad actors, why would we then defund the offices that 
we so badly need to assist us? And if we are really serious 
about cutting off illicit fentanyl and hitting back at the 
cartels, then it is critical that President Biden's budget be 
fully funded.
    I have read the testimonies from our witnesses here, and 
many of them have specifically said to us, what is it that you 
are doing? Why aren't you doing this? Where is the oversight? 
Why aren't you looking at, whether it is social media, whether 
it is government? But they are putting the onus back on us, and 
we are ready to respond to that. And this is one of the things, 
Mr. Chairman, that I think we should take a look at, because a 
problem of this scale requires a multipronged, bipartisan, 
coordinated solution, and I really look forward to starting 
that process here today.
     I thank our witnesses for lending us all of your knowledge 
and expertise. And let me just say, I want to thank you, Mr. 
Cassara, for giving all of us a copy of your book, ``China-
Specified Unlawful Activities: CCP Inc., Transnational Crime 
and Money Laundering.''
    Mr. Chairman, I yield back.
    Chairman Luetkemeyer. Thank you for those remarks, Mrs. 
Beatty.
    We now welcome our panelists for their testimony today. 
What we will do is, I will introduce each of you, and then we 
will open it up for your opening testimony.
    First, Mr. John Cassara. Mr. Cassara is an expert in the 
field of anti-money laundering and countering the financing of 
terrorism. He is a former U.S. Intelligence Officer, Treasury 
Special Agent, and an accomplished author with several 
publications on financial crime and illicit finance. And I, 
too, want to thank you for presenting your book to each one of 
us. It is going to be very instrumental, I think, in 
understanding and continuing to learn about these issues. We 
certainly appreciate that and your expertise, sir.
    Second, Mr. Donald Im. Mr. Im is a retired Drug Enforcement 
Administration (DEA) Agent who has dedicated his career to 
combating drug trafficking and drug-related crimes. With over 
25 years' experience, Mr. Im has led and participated in 
numerous high-profile investigations, including those involving 
international drug trafficking organizations. He has also 
worked in various roles within the DEA Special Operations 
Division, including as a Special Agent, an Assistant Special 
Agent in Charge, and a Country Attache.
    Third, Professor Celina Realuyo. Professor Realuyo is an 
accomplished scholar and practitioner in the field of 
international security and development. She has held senior 
positions in both the public and private sectors, including 
serving as a career diplomat at the U.S. Department of State, 
and as a senior executive for global financial institutions.
    Fourth, Mr. Jason Grellner. Mr. Grellner actually was a 
former constituent of mine, and I worked with him for many, 
many years. He has been on the ground fighting this war in the 
trenches for years. Mr. Grellner is a highly-experienced law 
enforcement official with over 30 years of service in the field 
of criminal justice. He is a former narcotics detective and 
sheriff's deputy. Mr. Grellner has served in various roles 
within the Missouri State Narcotics Officers Association and is 
a nationally-recognized expert on drug policy.
    And finally, Ms. Gretchen Peters. Ms. Peters is a 
distinguished investigative journalist and author who has 
devoted her career to covering global security issues, 
including terrorism, organized crime, and corruption. Ms. 
Peters is currently the founder and executive director of the 
Alliance to Counter Crime Online, a nonprofit organization 
dedicated to combating online crime.
    Welcome to each of you. Thank you for taking the time to be 
with us today. We look forward to your testimony.
    Each of you will be recognized for 5 minutes to present 
your oral testimony, and without objection, each of your 
written statements will be made a part of the record.
    Again, thank you for your willingness to be here, and with 
that, Mr. Cassara, I recognize you for 5 minutes.

  STATEMENT OF JOHN A. CASSARA, SPECIAL AGENT, U.S. TREASURY 
                           (RETIRED)

    Mr. Cassara. Thank you, and good morning, Chairman 
Luetkemeyer, Ranking Member Beatty, Chairman McHenry, Ranking 
Member Waters, and distinguished members of the subcommittee. 
It is an honor for me to testify in today's hearing. I would 
like to give you a general overview of the CCP's business model 
that is fueling the fentanyl crisis.
    Communist China is an ideological, military, economic, 
commercial, high-tech, intelligence and diplomatic rival of the 
U.S. in the West. The People's Republic of China has a growing 
exploitative presence in the developing world. While these 
threats are known, the Chinese Communist Party's involvement 
with transnational crime and money laundering is not. We have 
been ignoring the massive totality of what I call, ``CCP 
Inc.'s,'' involvement in transnational crime, as well as 
Chinese-centric money laundering methodologies and enablers 
that facilitate the criminality.
    The title of my most recent book is, ``China-Specified 
Unlawful Activities: CCP Inc., Transnational Crime and Money 
Laundering.'' I found that criminal activity has seemingly 
become part of the CCP's overall strategy to grow its powers. 
We cannot look at the fentanyl issue in a vacuum or as an 
isolated concern. The CCP's business model that fuels the 
fentanyl crisis is also active in many other sectors of crime. 
In my book, I examine 12 significant categories of 
transnational crime. Each are also specified unlawful 
activities, also known as SUAs, or predicate offenses to charge 
money laundering.
    CCP's involvement in these crimes is approximately $2 
trillion a year. To put things in perspective, $2 trillion is 
approximately half of the roughly $4 trillion that is laundered 
annually around the world. Regarding fentanyl, Chinese 
companies make chemical compounds sold globally for legitimate 
purposes in medicine and industrial processes. Opioid vendors 
shield themselves behind these companies and layers of 
interlinked companies, sometimes in related fields such as 
biotechnology. Illicit production and distribution are assisted 
by layer upon layer of traders and brokers and freight 
forwarders. Chinese trafficking organizations deliberately 
misuse this labyrinth to transport drugs, precursors, and 
contraband through shipping containers that are often 
mislabeled.
    Because of a few crackdowns by the authorities, the Chinese 
vendors created new distribution strategies. They sell 
precursor chemicals to foreign clients. Boutique suppliers also 
tweaked their formulas, taking advantage of regulatory and 
enforcement loopholes. New transport and mail routes were 
developed, sending the banned substances into Mexico and 
sometimes to other countries. The U.S. is the final destination 
for most of the finished product. Also troubling is that 
Chinese actors aggressively use the internet and social media 
to advertise and market their illicit products, often in 
English. They blatantly target Western consumers.
    It is important to remember that the People's Republic of 
China (PRC) is a command state. The Chinese Communist Party 
(CCP) could easily block websites advertising fentanyl and 
other dangerous and illegal drugs. They choose not to. In my 
book, I discuss a number of money laundering methodologies and 
enablers used by the CCP, including underground banking, 
capital flight, gambling, real estate, and the use of offshores 
and secrecy jurisdictions. Corruption is the great enabler for 
money laundering. CCP Inc., has taken their domestic corruption 
and exported it overseas. CCP Inc., also excels at elite 
capture and influence operations.
    Other enablers I discuss in my book include Chinese 
organized crime, espionage, social monitoring, the promotion of 
Chinese control of international free trade zones, lack of 
Chinese cooperation with international law enforcement, and 
poor Chinese money laundering compliance. Three money 
laundering techniques that directly impact the trafficking of 
fentanyl are trade-based money laundering, black market 
exchanges, and Fei-Chien, or flying money. I provide 
explanations for each in my written testimony.
    Once again, these SUAs, methodologies, and enablers cannot 
be viewed in isolation. Rather, they are intertwined and must 
be addressed collectively. CCP Inc,'s, international law 
breaking makes them exposed. They are vulnerable. I conclude 
with recommendations that emphasize law enforcement. Thank you 
very much.
    [The prepared statement of Mr. Cassara can be found on page 
44 of the appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Cassara. Well done.
    Mr. Im, you are now recognized for 5 minutes.

   STATEMENT OF DONALD H. IM, DEA ASSISTANT SPECIAL AGENT IN 
                        CHARGE (RETIRED)

    Mr. Im. Good morning, Chairman Luetkemeyer, Ranking Member 
Beatty, Chairman McHenry, Ranking Member Waters, and 
distinguished members of the subcommittee. I want to thank you 
for the opportunity to speak with you here today, along with my 
fellow panelists.
    Over the past 6 years, over 1.5 million Americans have died 
due to drug overdoses and poisonings, perpetuated predominantly 
by the Sinaloa and CJNG cartels, using synthetically-produced 
chemicals designed and manufactured by Chinese chemists and 
laboratories located in Wuhan, Hubei Province, and other 
provinces throughout China.
    As a recently-retired DEA Special Agent, I spent over 31 
years, helping to dismantle drug, weapons, and wildlife 
trafficking, and terrorist organizations, by following their 
money, then finding ways to cut off their wealth and their 
financial support mechanisms.
    In the early 1990s, with the FBI, Customs, the IRS, the 
intelligence community, and the Departments of Defense, State 
and Treasury, the DEA was the tip of the spear that led to the 
successful dismantling of the Medellin Cartel (Pablo Escobar) 
and the Cali Cartel. Not long after Escobar's accountants and 
lawyers were identified and removed, he met his fate in late 
1993. In 1995, then-President Clinton signed the first-ever 
narcotic sanctioning against the Cali Cartel under the 
International Emergency Economic Powers Act that helped 
dismantle the once-powerful cartel. The DEA had identified the 
cartel's entire front companies based on a series of financial 
raids conducted by the Colombian National Police years prior. 
By identifying and attacking the financial underpinnings of 
these criminal organizations, the DEA and its interagency 
partners were able to move upstream, to the command and 
control, and subsequently, to the kingpins and bring them to 
justice.
    Throughout the 1990s and 2000s, the DEA seized billions of 
dollars of drug cash off the streets, thereby disrupting the 
drug cartels' funding streams necessary to produce more drugs, 
acquire more weapons, and to corrupt the rule of law.
    I ask you, Congress, the President of United States, the 
national security leaders, and the Secretaries of the Treasury, 
State, and Defense Departments, to fully support the DEA with a 
more-robust budget, resources, and the authority to lead the 
whole U.S. Government and let DEA be that tip of the spear 
again. Unleash the DEA, let the men and women of the DEA do its 
job, go after the cartels, the global Chinese money launderers, 
the cartel facilitators, and their accountants, lawyers, 
businessmen and businesswomen propping up and protecting their 
wealth that allows them to corrupt the rule of law with their 
profits.
    If you want to mitigate this deadly epidemic and curtail 
the poisonings and overdoses, give the DEA additional manpower 
by deputizing thousands of State, local, and Federal law 
enforcement officers and agents op-conned to the DEA field 
offices. Increase HIDTA budgets throughout the United States in 
order to identify online drug traffickers and coordinate 
efforts to conduct nationwide takedowns of digital drug dealers 
marketing and selling counterfeit fentanyl-laced pills and 
other drugs, and charge them with attempted murder. Let the 
prosecutors use the full force of the law so that law 
enforcement can capture and dismantle those higher-level 
sources of supply across the supply chain and throughout the 
United States and abroad.
    After the September 11, 2001, terrorist attacks, the 
National Counter Terrorism Center was created to coordinate 
intelligence, military, and law enforcement agencies in one 
facility to help track and destroy terrorist organizations, and 
prevent further attacks, with billions of dollars appropriated 
to fund and operate this center.
    Since 1992, the DEA has operated a similar entity called 
the Special Operations Division (SOD), an interagency center 
with over 35 law enforcement, intelligence, and military 
agencies, designed to identify the command and control of the 
most-powerful and violent drug trafficking and transnational 
criminal organizations. The SOD successfully coordinated the 
arrests of drug cartel leaders like Chap Guzman, helped arrest 
and remove key Taliban leaders off the battlefield, and 
arrested key Hezbollah operators and financiers, and even a 
Russian arms dealer.
    Fuel the SOD with a larger budget and fully staff it with 
key interagency executives, agents, and analysts, to allow the 
Center to fully maximize its capabilities. Streamline a multi-
pronged strategy in the SOD by integrating a team of criminal 
investigators, intelligence, cyber, and data analysts from the 
FBI, the DEA, the HSI, the IRS, Treasury, and the U.S. Postal 
Inspections Service, to establish a Financial Investigation 
Center that will identify the key financiers, the nodes of the 
entire illicit narcotics supply chain.
    We don't need to reinvent the wheel; we just need to re-
align and tune up our capabilities and provide the necessary 
resources and leadership to unleash the DEA and its interagency 
partners to dramatically reduce and eliminate this crisis once 
and for all. Thank you.
    [The prepared statement of Mr. Im can be found on page 82 
of the appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Im.
    Professor Realuyo, you are now recognized for 5 minutes. 
Thank you.

 STATEMENT OF CELINA B. REALUYO, ADJUNCT PROFESSOR, THE GEORGE 
 WASHINGTON UNIVERSITY ELLIOTT SCHOOL OF INTERNATIONAL AFFAIRS

    Ms. Realuyo. Good morning. Thank you, Chairman Luetkemeyer, 
Ranking Member Beatty, and members of the subcommittee for this 
opportunity to speak today on China and the Mexican cartels' 
asymmetrical war through the illicit fentanyl tree. Exactly 3 
years ago, I had the privilege of appearing before this 
committee to discuss countering the threat from the Mexican 
cartels and the opioid epidemic. Unfortunately, this epidemic 
has only worsened since then.
    During the pandemic, fentanyl use and trafficking exploded, 
and fentanyl has become the leading cause of death of Americans 
ages 18 to 49. The fentanyl crisis is not only a problem for 
the U.S., Canada, and Mexico, but has increasingly been 
discovered in Brazil, Colombia, Costa Rica, Guatemala, and 
Panama.
    Mexico, Sinaloa and Jalisco cartels, and their Chinese 
suppliers and money runners have capitalized on the fentanyl 
crisis to empower and enrich themselves. They are waging an 
asymmetrical war against the U.S. through this drug trade that 
is poisoning witting and unwitting Americans and exhausting 
vast public and private sector resources in prevention, 
treatment, and supply interdiction efforts. In classical 
asymmetrical warfare, the resources of adversaries are uneven, 
and those adversaries will attempt to exploit each other's 
relative weaknesses to gain advantage. In this case, the 
Mexican cartels and China are exploiting America's insatiable 
appetite for illicit drugs and our porous borders. China is the 
principal source of illicit fentanyl and fentanyl-related 
compounds that are manufactured and then shipped in bulk to the 
U.S. and Mexico.
    When drug consumption here in the U.S. shifted from cocaine 
and heroin to synthetics, and the U.S. Postal Service clamped 
down on direct mail fentanyl shipments from China to the U.S., 
the Mexican cartels filled that vacuum and became primary 
traffickers of fentanyl, and fentanyl-related drugs that are 
easier to produce. They are more lucrative, and they are much 
more addictive. This China-Mexico connection grew when Chinese 
traffickers increased fentanyl precursor sales to the Mexican 
cartels.
    And in Mexico, we see that Chinese nationals, like the 
Zheng cartel, have become more involved in fentanyl operations, 
leveraging their extensive relationships with suppliers to 
support Mexican drug production. In 2018, President Trump urged 
President Xi of China to stop fueling the opioid crisis, and 
managed to get the Chinese to designate all variants of 
fentanyl as controlled substances. Unfortunately, they have not 
been enforcing these controls, and are actually encouraging--as 
the chairman noted--and incentivizing this industry. Nothing 
happens in China without the precise knowledge, permission, and 
sanction of the Communist Chinese Party.
    Last year, we actually saw the PRC punish the United States 
by suspending counter-narcotics operations when former Speaker 
Pelosi went to Taiwan unexpectedly. Mexican cartels are 
increasingly turning to Chinese money launderers because they 
are much more efficient. They are more inexpensive, and they 
are reliable, and we also know that the Chinese are desperately 
in need of hard U.S. dollars. The Chinese serve as key enablers 
of the Mexican drug trafficking organizations. They profit at 
the front end of the business cycle, purveying fentanyl and 
precursor chemicals, and at the back end by laundering the 
millions of dollars generated by the Mexican cartels in the 
United States.
    Unfortunately, the U.S. is currently facing formidable 
challenges in combating the fentanyl crisis, as counter-
narcotics cooperation with the PRC and Mexico is at a low 
point. This is a consequence of broader deteriorating 
relationships between our President, Chinese President Xi, and 
Mexican President Andres Manuel Lopez Obrador, who do not 
consider the fentanyl crisis to be their problem.
    But let's consider some measures to counter the illicit 
fentanyl crisis as an asymmetrical war that is being waged by 
the Chinese and Mexican cartels. First, decrease drug demand in 
the United States by educating Americans about the opioid 
epidemic and the deadly dangers from fentanyl-laced counterfeit 
drugs.
    Second, reinforce U.S. border security to detect, 
interdict, and prevent the flow of drugs, including fentanyl, 
into the United States.
    Third, designate the Sinaloa and Jalisco cartels as foreign 
terrorist organizations. This would allow U.S. Government 
agencies to more-aggressively pursue the cartels, their assets, 
and their collaborators under the Material Support to 
Terrorists statute. We did this 20 years ago with the Colombian 
FARC rebels, and it was quite effective.
    Fourth, hold China accountable for the export of fentanyl 
and precursor chemicals through punitive measures, including 
sanctions, tariffs, and perhaps threatening to withdraw Most 
Favored Nation status.
    Fifth, revitalize U.S.-Mexican security cooperation through 
the U.S.-Mexico Bicentennial Framework for Security, Public 
Health, and Safe Communities, to protect our people, pursue 
criminal networks, and disrupt those illicit financiers.
    And lastly, and of particular interest to this committee, 
detect, dismantle and prosecute Mexican and Chinese money 
laundering networks associated with the fentanyl crisis in the 
U.S. and abroad.
    Thank you for your time and attention. I look forward to 
your questions.
    [The prepared statement of Professor Realuyo can be found 
on page 91 of the appendix.]
    Chairman Luetkemeyer. Thank you, Professor Realuyo.
    Mr. Grellner, you are up next for 5 minutes.

STATEMENT OF JASON GRELLNER, VICE PRESIDENT, HEALTHCARE, EVOLV 
                           TECHNOLOGY

    Mr. Grellner. Thank you. Chairman Luetkemeyer, Ranking 
Member Beatty, and esteemed members of the subcommittee. Thank 
you all for allowing me to testify today regarding the 
poisoning of nearly 1 million Americans.
    Opioids and now synthetic opioid poisoning is the leading 
cause of accidental death in the United States, overtaking car 
accidents nearly a decade ago, but this is no accident. Drug 
trafficking organizations know exactly what the impact on 
individuals and communities will be. And the overall trend has 
the hallmarks of a planned attack on the United States by 
terrorist organizations, narco-states, and world powers bent on 
destabilizing and weakening the United States.
    Drug abuse in the United States has always had an element 
of one person's greed, preying on another person's illness, 
with yet another person getting rich off of the ill-gotten 
gains. This attack will not be stopped by merely attempting to 
treat the sick in our own country or by fighting this threat 
from inside our own borders. This overwhelming international 
push of deadly poison into our communities is an immediate 
threat to our national security and deserves an immediate 
commensurate response.
    It is anticipated that statistics may show another 140,000 
Americans died from fentanyl or one of its many synthetic 
derivatives in 2022. That will be on top of the 107,000 
Americans who were killed in 2021. Synthetic fentanyl, as you 
have heard, is largely manufactured in Mexico from ingredients 
sourced in China. Chinese companies have been supplying the 
United States with cheap synthetic drugs across the internet 
for the past 20 years. Illicit manufacturers circumvent DEA and 
FDA regulations by changing the chemical makeup just enough to 
offer a slightly different experience to the user while getting 
around Federal law.
    It should come as no surprise that when China cracked down 
on synthetic fentanyl distribution, it made no difference in 
worldwide synthetic opioid sales. Chinese organized crime, 
under the watchful eye of the CCP, began selling the components 
instead of the final product. Both the Sinaloa and Jalisco new 
generation cartels immediately began manufacturing the poison 
in multi-kilo batches within days.
    Cartels easily buy kilos of precursor chemicals from China-
linked middlemen and now operate with impunity at western 
Mexican ports to ensure quick delivery. A kilo of Chinese 
precursors may cost as little as $200 but can be sold in New 
York for $3 to $5 for only 2 milligrams. The profit on that 
kilo can reach $1 million. That money is used to pay dealers, 
mules, stash houses, security, bribes, money laundering, and to 
buy power and influence. The recent conviction of Genaro Garcia 
Luna, Mexico's former public safety secretary, shows the height 
of influence that cartels wield in Mexico.
    The question that always comes to my mind when a Mexican 
official is indicted in the U.S. is, why? If there was enough 
evidence to charge and convict in the U.S., why is the Mexican 
government not engaged in seeking justice on their own? Mexico 
is a narco-state open for business with any foreign power or 
terrorist organization willing to pay for their political 
influence and the cost of dealing with U.S. border controls. 
With an estimated $60-billion-a year illicit drug industry 
thriving on our southern border, no single solution will end 
this problem, which has been brewing since the 1800s.
    In February of this year, 128,777 individuals were caught 
crossing the U.S.-Mexican border. Of those, 16 were on the FBI 
terrorist watchlist: 16 watch-listed individuals in 1 month, 
and those were just the people who were caught. Mexico and 
China do not have the best interests of the United States or 
its citizens in mind. Let's put this in perspective: If a 
foreign country had infiltrated the United States with 
terrorist agents, released ricin or anthrax that killed over 
100,000 Americans in a single year, what would our response be?
    There is no single silver-bullet solution to this problem. 
Just as in any confrontation, the winner is the entity that 
attacks from as many angles as possible. The Federal policy has 
trended towards addressing the demand side of the equation over 
the past decade as the epidemic has skyrocketed. The data and 
empirical evidence clearly show that this approach is not 
working, and we will never rehabilitate our way out of this, 
just as with COVID. We didn't just wait for people to get sick 
and treat the ill; we pushed for a vaccine to prevent the virus 
from taking hold.
    We need strong prevention efforts in our schools and 
community organizations. We need renewed commitment to funding 
State, local, and Federal task forces which are the most-potent 
tools we have in addressing drug trafficking networks. State 
and Federal funding for task forces has declined in the recent 
years, just as drug trafficking overdoses have skyrocketed.
    In closing, I want to thank the committee for examining 
this important topic. It is killing hundreds of individuals 
daily across the nation. We must not accept another child dying 
in a school bathroom or a loved one on the street or in the 
home from drug poisoning. We must do more, and the time to act 
was yesterday. Thank you.
    [The prepared statement of Mr. Grellner can be found on 
page 79 of the appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Grellner.
    And Ms. Peters, you are now recognized for 5 minutes.

 STATEMENT OF GRETCHEN PETERS, EXECUTIVE DIRECTOR, ALLIANCE TO 
                  COUNTER CRIME ONLINE (ACCO)

    Ms. Peters. Thank you, Chairman Luetkemeyer, Ranking Member 
Beatty, and distinguished members of the subcommittee. This is 
my 4th time since 2019 testifying in Congress about the deadly 
fentanyl crisis, and how social media drives it, and I have to 
say I am angry about and tired of coming here to discuss this. 
Why are we still sitting here talking while so many Americans, 
and especially so many young Americans, are dying?
    Since my first testimony in 2019, our country has lost 
hundreds of thousands of people to fentanyl. Among them, 
pictured here, we have lost Alexander Neville, Jessica Filson, 
Daniel Puerta,--whose father is sitting here today with us--
Giovanni Perkins, Private Tyler Duncan, Devin Norring, and so 
many more that I submitted a memorial gallery along with my 
testimony. It is almost 50 pages long, and it represents a 
fraction of the number of people who have died.
    I am the co-founder and executive director of the Alliance 
to Counter Crime Online. We are a team of researchers, NGOs, 
and citizen investigators who have come together to fight the 
deadly surge and serious crime activity that is taking place on 
surface web platforms. Our alliance has supported our members, 
tech whistleblowers, and victims of online crime to file civil 
complaints against tech platforms, and we do a lot of research 
on what is happening in various types of organized crime. Jaime 
Puerta, for example, is part of a group of families that are 
suing Snapchat, where his son and other children connected with 
dealers to purchase the pills that killed him.
    I applaud you for the fact that you are aiming to target 
Chinese companies that are facilitating the spread of deadly 
fentanyl analogues in this country. But I am here to ask you 
today, why aren't you also targeting the American social media 
companies whose algorithms spread these deadly pills that are 
killing so many of our children? Brick-and-mortar businesses 
operate under a duty of care to keep illegal activity off their 
premises. If a nightclub becomes a haven for drug dealing, it 
can face fines and even closures. Yet, social media platforms, 
like Instagram and Snapchat, which are used by a vast majority 
of American teens, are riddled with drug content.
    Slide 2, which I have submitted for the record, contains 
typical screenshots that show drug dealers operating on 
Snapchat and Instagram. The ones pictured here have account 
names like buy--oxycontinchicago, plac.eyourorder, pictures of 
pills and powder, and emojis that are widely used to represent 
drug sales. In other words, these accounts are out in the open, 
easy to find, and unambiguous about their purpose, but because 
of Section 230 of the Communications Act, this content is 
considered protected free speech.
    Distinguished committee members, this content does not 
represent somebody expressing their protected right to free 
speech. It represents people committing felonies. And I want to 
know how many more young Americans have to be sacrificed on the 
altar of free speech before you, our elected members, can 
figure out a way to define the difference between protected 
speech and criminal conduct, which is what we are seeing here.
    I am submitting for the record a briefing where the 
Department of Justice asked our Alliance to Counter Crime 
Online to explain how we think our laws can be adjusted to 
govern cyberspace better and to address organized crime 
activity on the surface web. I am also submitting a briefing 
paper explaining the toxic mix of circumstances driving the 
unprecedented number of drug-related deaths in our country. You 
asked us to follow the money, and this is another area where we 
believe that social media platforms ought to be regulated 
differently from brick-and-mortar financial institutions.
    [Slide]
    A number of big platforms where fentanyl and other 
counterfeit medicines are moving have built-in payment 
processing systems that function much like PayPal or Western 
Union. These payment systems are usually separately-registered 
money service businesses that are wholly owned by the parent 
company. Three types of criminal activity are happening through 
these payment platforms. They include the retail sales, like 
what you see here--next slide, please--the wholesale sale of 
drugs from producers and chemical companies like pictured here, 
mainly in China, selling precursors to wholesalers here in the 
United States.
    From the research we have done at ACCO, it is apparent that 
most platforms are technically compliant with Know Your 
Customer (KYC) regulations. Yet, the regulations don't 
anticipate where the parent company is the owner of a money 
services provider and a massive data aggregator, or individuals 
that aggregate data on individuals, for example, Meta, owning 
both Meta Pay and Facebook Marketplace, or Tencent owning the 
payment platform that is connected to WeChat. In other words, 
the moderators tracking payments can't see if drug content and 
moderators watching the content have no way to alert the 
payment moderators that there is a drug transaction happening. 
What this means is that the tech companies are actually making 
millions of dollars off of the drug trade in this country.
    We are asking you today to commission a congressional 
investigation and to subpoena tech companies, including Meta 
and Tencent, to investigate how they moderate payments and how 
much they earn off of illegal drug sales.
    My final point, I also ask you to investigate whether the 
scale of drug activity on social media platforms, specifically 
Snapchat, Facebook, Instagram, and WeChat, rises to the level 
of RICO violations. Thank you very much.
    [The prepared statement of Ms. Peters can be found on page 
85 of the appendix.]
    Chairman Luetkemeyer. Thank you, Ms. Peters.
    We have been joined by the chairman and the ranking member 
of the Full Committee. The chairman has waived his opening 
statement, so he will be asking questions later. But the 
ranking member, Ms. Waters from California, has requested a 
minute, so she is recognized at this point for 1 minute.
    Ms. Waters. Thank you very much, Mr. Luetkemeyer. I do have 
a question that I would like to raise at this point. Let me 
first state--okay. Then, we will do the opening statement.
    The trafficking of fentanyl and other drugs poses a 
significant public problem, and concern all across the United 
States. In Los Angeles County alone, the number of deaths tied 
to fentanyl overdoses has skyrocketed, with more than 13 times 
as many deaths in 2021 as there were 5 years prior. 
Unfortunately, Black and Brown communities are all too familiar 
with the effects of drug epidemics on their communities. And I 
hope that the same attention being paid to communities harmed 
by fentanyl will be paid to the communities hit by other drug 
epidemics, including crack cocaine.
    I also hope that this committee rejects efforts by extreme 
Republicans in Congress bent on slashing the budgets of the 
Treasury Department agencies, like FinCEN and OFAC, which are 
tasked with countering the trafficking of illicit drugs like 
fentanyl. Thank you, and I yield back the balance of my time.
    Chairman Luetkemeyer. Thank you. With that, I want to thank 
the witnesses this morning for your compelling testimony, and 
we will now enter into the questioning period. And I will first 
recognize myself for 5 minutes.
    The purpose of this subcommittee is to look at illicit 
financing and money laundering going on around the world, and 
obviously, this morning's hearing is regarding the fentanyl 
scourge that is affecting our country and our people and our 
citizens. The question is, how can we minimize that? How can we 
stop the financial flow to damage this industry?
    Mr. Grellner, I would like to start with you, because you 
start at the ground level with the local folks. What do you see 
as the way that the money is trafficked from the local dealer 
on the corner through to the cartels?
    Mr. Grellner. Most often, it is trafficked in large 
bundles, headed south towards the southwest border, so each of 
the cartels owns and operates at our southwest border 
crossings. And the major amount of violence coming out of 
Mexico is fights by the cartels over the control of those ports 
of entry into the United States, the flow of drugs and illegal 
immigration going north, and the flow of guns and money going 
south.
    With the advent of Chinese money launderers, however, they 
are able to orchestrate the movement of money into the hands of 
Chinese oligarchs, who can then use those U.S. greenbacks to 
purchase land in the United States, real estate. They can place 
individuals into our higher-learning centers and pay cash for 
that in U.S. greenbacks that they cannot get in China. They can 
do that at a cost savings to the Mexican drug cartels, who were 
at one time paying anywhere from 15 to 20 percent on the dollar 
to Colombian money launderers, and can now pay 1 to 2 percent 
to the Chinese.
    Chairman Luetkemeyer. Thank you, Mr. Grellner. One of the 
things that we have seen yesterday or the day before in the 
Washington Times--I believe it is here--was an article about 
how border security is national security. And there is a 
comment made in there that, unfortunately, Mr. Lopez Obrador, 
who is the president of Mexico, has ceded an estimated 35 to 45 
percent of Mexican territory to cartel sovereignty. And rather 
than trying to work with us here in the United States, he is 
claiming that fentanyl is not produced in Mexico.
    My question is, we see that the border is porous, and the 
drugs are coming across, so how do we stop this flow of money 
going around to pay for all of this?
    I want to ask Professor Realuyo first, how do you affect 
the flow of this? You had a couple of comments about this, and 
then comment on ways to deter this, for instance, like seizing 
assets, or sanctions. Are these some tools in our toolbox as a 
Congress that we need to be using? How would you see that 
working out?
    Ms. Realuyo. That is a great question. I was just in Mexico 
last week. I head to Guatemala on Monday, where, by the way, 
they have just done the first big illicit fentanyl bust, 
including the Mexican cartels, thanks to our colleagues at the 
DEA, so it's a little bit of a triumph there. In Mexico, we 
were doing very well in the past couple of years following the 
money. I, personally, have trained several hundred analysts as 
well as in law enforcement and in the military, trying to 
follow and use what we call actionable financial intelligence.
    And more importantly, the real problem, and I hate to say 
it, is the lack of political will by our counterparts at the 
highest levels of government in Mexico. I have been working in 
Mexico for 10 years and, more importantly, going fairly 
regularly when we can demonstrate that the problem is theirs as 
well as ours, but, unfortunately, we have not convinced 
President Lopez Obrador that this is the case. Two weeks ago, 
he blamed us for the fentanyl crisis, and just a few days ago, 
he blamed our parenting as the cause of the consumption. We 
recognize that we have to reduce demand, but the supply is 
definitely coming from them.
    What is interesting is that we are seeing now, in terms of 
new methods, the start of the use of cryptocurrencies, 
particularly by the Jalisco cartel. They are paying young 
Mexicans to open virtual wallets that are then used to upload 
the dollars on the U.S. site and then download in pesos, which 
totally avoids U.S.-dollar controls.
    Chairman Luetkemeyer. Thank you for that. Mr. Cassara, I 
would like your comments on that. You specialize in financial 
crime, illicit finance. Tell us what we can do. Is the seizure 
of asset a way to deter folks? Or is that just going to shift 
things around the world? How do we disrupt this financial flow?
    Mr. Cassara. It is an excellent question, and something 
that many of us have been struggling with for years. If you 
look at what I call the metrics that matter when it comes to 
money laundering enforcement, as far as arrests, successful 
prosecutions, convictions, and monies, assets that are actually 
forfeited to the government, as a colleague of mine, Raymond 
Baker, head of global financial security said, we are a decimal 
point away from total failure. If you compare what we are 
actually enforcing against the magnitude of the problem, it is 
very sad. There are--
    Chairman Luetkemeyer. My time is up, and I am going to set 
a good example here, but thank you for that. I think that our 
challenge as a committee is to see where we can most 
effectively stop this flow of funds.
    With that, I will yield to the ranking member of the 
subcommittee, Mrs. Beatty, for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman, and thank you to the 
witnesses. I am going to try to get through three or four 
questions quickly, so I may ask you for abbreviated responses. 
First, starting with you, Ms. Peters, can you clarify for us 
the primary methods by which drugs, particularly illicit 
fentanyl, are trafficked into this country, especially more 
surprising methods that don't get enough attention? You kind of 
highlighted it a little bit with your presentation. Is there 
any one thing you would ask us to take a look at?
    Ms. Peters. I would ask you to take a look at--as I said in 
my testimony--working with the House Energy and Commerce 
Committee and your partners in the Senate, at reforming Section 
230 of the Communications Act, to remove the liability shield 
that the tech platforms currently enjoy for posting illicit 
content, even if they know it is there, and even if they know 
it is causing harm. This is basically a huge subsidy to the 
tech industry and a disincentive for them to remove this 
dangerous content because they can't be prosecuted. That would 
be the number-one thing I would say to protect people who are 
seeing this content everywhere online.
    Mrs. Beatty. Thank you. Mr. Grellner, you also mentioned 
that it was by no accident, and I like that reference to when 
you did car accidents. We also know if you look at the same age 
group of 18 to 49 and it was 100,000 deaths, it is only 58,000 
with COVID-19. If we go back to the Vietnam War, same age 
group, 53,000. Can you explain this phenomenon and what lessons 
we can learn to identify emerging drug use in the future to 
protect our communities? Give us one thing we can do with these 
alarming numbers that aren't, in your words, by accident?
    Mr. Grellner. Thank you. I think I was asked a question the 
other day that even caught me off guard. The question was, why 
are they selling drugs to us to kill us? Because they want to 
kill us. DEA Laboratories just came out this week with 
information that 48 States have now seen fentanyl laced with a 
non-reactive agent, a tranquilizer used in veterinary sciences 
that will not react to naloxone, which means that if you 
overdose from this byproduct, we can't bring you back with a 
nasal naloxone. It won't work, because we are also suppressing 
your breathing by using this veterinary tranquilizer. There is 
only one reason that they are selling this poison: It is to 
destabilize the United States and to kill Americans.
    I worked back in the 1980s with Project Colombia, and 
Project Nicaragua, when cocaine was coming into the United 
States as a party drug. I worked on 1,265 meth labs, when meth 
lab components were all over the United States. It was about 
getting high, having a good time, and partying. This is about 
killing people, and the sooner we understand that and realize 
that, and fund the DEA and local and State task forces to go 
after it, the better off we will be.
    Mrs. Beatty. Thank you. Mr. Cassara, I have just had a 
chance to read one of the chapters of your book that deals with 
fentanyl and trafficking. A lot of people are putting a lot of 
emphasis on the southern border as the primary point of 
fentanyl trafficking. We hear that a lot. Some of my reading 
suggests that is inaccurate, and it ignores the fact that 90 
percent of fentanyl seizures occur at legal crossings. We have 
also heard about how it goes through the mail and PayPal. Just 
in my airport, and we are landlocked in Ohio, there was enough 
to kill 171,000 people in my district, when I flew to the 
district this week.
    What would be the number-one thing, Mr. Cassara and Mr. Im, 
that this committee should do? As experts in this field, give 
us one thing?
    Mr. Cassara. I don't have access to tactical intelligence 
like I once did, so I am not as current on the numbers as, for 
example, my colleague, Don, can probably give you a much better 
feel for that. If I could suggest one thing that our government 
should do?
    Mrs. Beatty. Yes.
    Mr. Cassara. Control the border.
    Mrs. Beatty. Mr. Im?
    Mr. Im. Thank you for the question, Ranking Member Beatty. 
The best way to effectively tackle this issue, since we are 
here in the Financial Services Committee on the topic of, 
``follow the money,'' is to use money as leverage, use it as a 
weapon and a tool. That is what the DEA has done since the DEA 
was founded. And the way to do that is to strangle their 
ability to generate those funds. At the same time, in order to 
convince those governments, use trade as--
    Mrs. Beatty. I'm sorry. My time is up, but thank you for 
making it germane to the committee that it is about the money 
and not necessarily other things we are hearing. Thank you, Mr. 
Chairman.
    Chairman Luetkemeyer. Thank you. With that, we recognize 
the Chair of the Full Committee, Mr. McHenry from North 
Carolina, for 5 minutes.
    Chairman McHenry. Thank you, Chairman Luetkemeyer, and 
thank you for holding today's hearing. I think this is very 
important. I think we just can't lose sight of the fact that 
there are too many families who have lost loved ones as a 
result of fentanyl poisoning, and this is very, very helpful.
    I reached out to sheriffs in my district to get a sense of 
what is happening in western North Carolina on this very issue 
of fentanyl and what their deputies are seeing as they are out 
in the communities. And I got a response from one of my 
sheriffs in Iredell County, Darren Campbell. He said that since 
the beginning of this year, his deputies have saved the lives 
of 18 people using Narcan to counter the effects of fentanyl-
laced narcotics. Fentanyl-laced narcotics--they didn't think 
that is what they were getting, and you shook your head yes, I 
see. So along those lines, I have a letter for the record, Mr. 
Chairman. Without objection, I would like to--
    Chairman Luetkemeyer. Without objection, it is so ordered.
    Chairman McHenry. But this is a troubling and unfortunate 
trend. And this hearing today is about following the money and 
the impact we can have on cutting off the flow of money because 
that is the key ingredient that is necessary for the drug trade 
to actually flourish.
    Mr. Cassara, the criminals are pushing fentanyl. We focus 
on what we see in the immediate, not who is providing it, what 
is on the back side of this thing, and the international drug 
trade. In your book--I am not here to show your book, but 
apparently I am--you note that Federal law enforcement tends to 
focus on participants and the product rather than the money. 
So, how do we incentivize following the flow of money?
    Mr. Cassara. Once again, an excellent question. The 
criminals are motivated by profits, by proceeds of crime, not 
the criminal activity themselves, not the narcotics, not the 
product, but the proceeds of crime. We have talked about 
following the money for years, but we have never really 
actually done it. I have talked before about having to change 
the incentives for law enforcement to get them to refocus a 
little bit.
    I think there are two ways we need to do this. The first 
way is to look at this kind of at the macro level, because 
government agencies and departments need to kind of make this a 
priority in their strategic plans. They all have strategic 
plans, 5-year plans. Metrics need to be established, and 
perhaps the budgets could be contingent on making or meeting 
those metrics.
    At the micro level, if you will, Don knows better than I do 
today that law enforcement is statistics-driven. Statistics 
drive everything from budgets to promotions. That is also why 
some of these bureaucracies kind of play games with the numbers 
and statistics. They go after the people and the products 
instead of the money because, quite frankly, it generates 
better statistics.
    Mr. Im. Yes, it is easy.
    Chairman McHenry. So, it is easier to go nab a person 
rather than to go and get into the system of how this works? To 
that system question, Professor Realuyo, how do we hold China 
accountable for the flow of fentanyl?
    Ms. Realuyo. We know in terms of taking a look at trade 
movements, they have to get paid, and we haven't really 
sanctioned them. And more importantly, on a broader piece, 
naming, shaming, and the asset forfeiture piece have been the 
most instrumental tools that we have had to go after the 
Chinese, but, more importantly, we have to increase that 
activity. We have been doing it very well against the 
traditional Mexican cartels and the Colombian mafias that have 
been pushing cocaine for years.
    This is an area where we need to also--answering your 
question from before--make the financial crime bear the same 
weight and penalties as if you were trafficking a person or 
they were looked upon as white collar, right? Financial crime 
has always been looked at as there is no victim. All of us are 
victims, and it is the oxygen that allows these armed groups to 
flourish, and they are killing our people.
    Chairman McHenry. In our sanctions regime, we are the 
power. This committee is the power behind our sanctions regime 
here in the United States, and we have a traditional role in 
sanctions. We name names here in the United States, we have due 
process for those who get on those lists, and we hold them 
accountable, and that is really the key part and parcel of our 
regime, to actually be explicit about whom we are holding 
accountable. But thank you for that encouragement. That tells 
us that we have work that we need to do as a Congress.
    Thank you, Mr. Chairman. I yield back.
    Chairman Luetkemeyer. Thank you. The ranking member of the 
Full Committee, the gentlelady from California, Ms. Waters, is 
now recognized for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. Ms. Peters, 
I would like to thank you for your work at the Center for 
Illicit Networks and Organized Crime (CINTOC). I do believe 
that when citizens take up issues to work on, the very 
important issues that are undermining our democracy, 
undermining our efforts to be safe, that we really should 
support them, and you can't do this work without money. Do you 
need funds?
    Ms. Peters. I can tell you that our organization functions 
on less money annually than a company like Facebook spends 
lobbying Congress every single week. So, our organizations have 
almost no money. My friend, Jaime Puerta--who is here--and his 
organization, Victims of Illicit Drugs (V.O.I.D.) which is run 
by parents who have lost kids to the fentanyl crisis, have 
reached out to more than 40,000 American kids on their own 
dime. There is no government funding for this right now.
    We would like to see more funding for education for kids 
and also for parents, so they understand this toxic mix of 
misinformation that is out there. A lot of kids were buying 
pills online. They are not regular drug users. They actually 
know that street drugs are dangerous. They think they are 
buying a prescription Vicodin or Xanax, as happened with Daniel 
Puerta. He thought he was buying a pill to kind of relax him at 
the beginning of the pandemic, when he was trapped in his room 
and feeling sad. We hear that story over and over and over from 
families. They didn't ever hear the word, ``fentanyl,'' until 
the EMTs arrived to try to revive their dead child.
    There is a toxic mix of disinformation going on. Kids think 
they are getting safe pills. Social media platforms are teeming 
with drug content, and they are not required to remove it or 
restrict it or put up warnings about it. And parents think that 
the poisoning or overdose crisis won't happen to them because 
their kids aren't drug users. We really need to work on this 
information. But also, where this committee can help, is to 
really investigate the payments that are coming through the 
tech platforms that the kids are using to buy these drugs. We 
have seen a great reduction in street drug markets, the drug 
commerce at the retail level, and also at the wholesale level 
has really moved online, just like a lot of regular commerce. 
Thank you.
    Ms. Waters. Thank you very much. When you talk about the 
kind of work that you are doing with young people, the kind of 
work that families are doing who have lost kids, I am 
interested. And also, in addition to what you are advising us 
right now that should be taken seriously, what else could we be 
doing? I am interested in what you may think about, or maybe 
you have already thought about it, in terms of ads and other 
kinds of ways that you could try and educate young people and 
try and influence them, and tell them the pitfalls of getting 
involved with drugs and that it kills, all of that. What 
worries me, and even though you may be approaching this in a 
little bit different way, is we see that $8 billion was 
diverted, including $2.5 billion from the Department of Defense 
(DoD) for the Counterdrug Program, and $600 million from the 
Treasury Department for counter-trafficking, which includes 
sanctions support for law enforcement.
    So we have money that we are spending, but you keep coming 
back, like you said, and I don't blame you. You are tired. You 
want to see some results, and I want to see some of this money 
spent to help out in ways that maybe you have thought about, 
but certainly, you have not solicited money. You have not said 
that government, we can't do this without you. You are doing 
it. But wouldn't some of this money help you and these parents 
to do some of the education that these children need to have 
outside of what they may hear about?
    Ms. Peters. Ranking Member Waters, yes. Not only do 
organizations like ours need money, but all of the panelists 
have described different agencies of government that--we need 
to be throwing the kitchen sink at this problem.
    When I first testified about this, we were losing 60,000 
Americans a year. This last year, the official numbers are over 
108,000. It has nearly doubled in just 4 years. These are 
staggering numbers of people who are dying every single year, 
and there is not one single solution or silver bullet. There 
needs to be public education, extensive public education and 
prevention programs, both for kids and for street youth, and 
for people who already have addiction issues. There need to be 
healthcare interventions to try to reach those people who 
already are struggling with substance abuse disorder. We need a 
lot more money as, Don Im and John Cassara said, for the DEA. I 
believe that our DoD also--
    Chairman Luetkemeyer. Ms. Peters, your time has expired.
    Ms. Waters. Thank you very much. The chairman has been very 
generous, and thank you, sir. I yield back.
    Chairman Luetkemeyer. Thank you, Ranking Member Waters.
    With that, we will go to the gentleman from Texas, Mr. 
Williams, who is also the Chair of the House Small Business 
Committee.
    Mr. Williams of Texas. Thank you, Mr. Chairman, and I thank 
all of you for being here today. I am from Texas, and I can 
tell you firsthand that there is a crisis, as all of you know, 
happening at our southern border. I have been down there quite 
a bit. In February alone, Border Patrol encountered 154,000 
illegal aliens. And so far, we have not even seen the 
leadership that is needed from the Biden Administration to get 
this situation under control, and a lot of you talked about 
that today.
    I am extremely concerned that as our border agents continue 
to be overwhelmed by this rush of migrants, it is making it 
easier for drug traffickers to slip through the cracks and 
bring dangerous fentanyl into our country. I recently asked the 
Tarrant County Sheriff's Department at Fort Worth, in my 
district, how they had been impacted by fentanyl pouring across 
the border. They told me that in 2022, their office seized $35 
million worth of drugs, which was 1,000 percent more than the 
$3 million worth that was seized in 2020, further proving that 
with weakened border policies and a lack of resources for 
patrol agents, more lethal counterfeit pills laced with 
fentanyl will flood our community.
    Mr. Grellner, with your 30 years of narcotic enforcement 
experience, can you elaborate on how the crisis at the southern 
border is impacting law enforcement efforts to prevent fentanyl 
trafficking, and what types of policies are the most-burdensome 
for State and local law enforcement agencies?
    Mr. Grellner. Thank you, sir. Yes, the southwest border--
when the Full Committee Chair was speaking earlier, he talked 
about fentanyl and everything it is: fentanyl and 
methamphetamine; fentanyl and cocaine; fentanyl and 2C 
combinations. Fentanyl is in everything that is being brought 
across the southwest border. It is not just opioids with 
fentanyl in them or synthetic fentanyl. Fentanyl is being laced 
into every drug brought across the southwest border and then 
trafficked up through Texas, and through your State to 
Oklahoma, Kansas City, and then across the United States to 
Chicago, Atlanta, et cetera, infecting the entire United 
States.
    The biggest thing inhibiting the State officers and local 
officers from going after the money is State laws and Federal 
laws not being in lockstep, so that the State officers can't 
impact bulk cash currency being trafficked across their own 
States because they are not allowed to stop it, they are not 
allowed to seize it, and they are not allowed to work with 
their Federal partners from the DEA, the FBI, and other Federal 
task forces in making sure that money gets seized before it 
gets to where it needs to be.
    Mr. Williams of Texas. Okay.
    Mr. Grellner. So, working with our State partners, the 
Federal Government, and seizure laws to make sure that we are 
impacting bulk currency moving across United States. Thank you, 
sir.
    Mr. Williams of Texas. The opioid epidemic in the United 
States has devastated individual families and communities 
across the country. We see that today. Our prayers go out to 
all of you. The majority of fentanyl is mass-produced in Mexico 
by cartels using chemicals primarily imported from China. These 
pills are being mixed with other counterfeit drugs and then 
brought to the United States illegally, we have talked about 
that, and sold to unaware buyers, leading to deadly overdoses.
    To put this into context, from 1995 to 2019, drug-related 
overdose deaths have killed more U.S. citizens than terrorist 
attacks. There is direct evidence that the Chinese Communist 
Party is aiding cartels in the production of drugs that 
continue to take American lives. Yet, there has been little 
action from the Biden Administration to combat this lethal 
partnership between two hostile actors.
    Mr. Im, could you explain the benefits of designating 
cartels as terrorist organizations, and how should we hold the 
Chinese accountable for aiding the synthetic opioid crisis?
    Mr. Im. Thank you for the question. Yes, sanctions are an 
effective tool. It is a primary tool that we have used for the 
past 30-some years since we designated the Cali cartel. 
Reaching down into their pockets, preventing their ability to 
operate in the financial realm is the most-effective way to go 
after these entities. However, in order to leverage these 
countries to support law enforcement efforts, you have to use 
the ability of the Treasury Department, the Commerce 
Department, and the State Department on trade tools. Use trade 
as a weapon, as an influencer to convince these countries to 
start cracking down on what they are doing, what they are 
exporting to the United States, and what they are pushing from 
the southern border. We have to use all of our tools, the whole 
of government is necessary; DEA can't do this alone. We are 
here about following the money. Let's use money, and trade 
tools are one of the most-effective tools to influence these 
governments to follow that money.
    Mr. Williams of Texas. Thank you. I have a little time 
left. Let me just ask Mr. Cassara a question. Can you expand on 
the scale of Chinese money laundering quickly, and how can the 
U.S. better combat this illicit financial network?
    Mr. Cassara. Thank you. In my statement, I said that if you 
total up all of these specified unlawful activities, the 
largest categories of transnational crime, if you look at the 
numbers, it is about $2 trillion a year. If you look at the 
magnitude of international money laundering yearly, around the 
world, it is about $4 trillion. It is imprecise, but in my 
estimation, China is responsible for about half of the money 
laundered in the world. If you look at individual--
    Mr. Williams of Texas. Thank you. My time is up. Thank you 
very much.
    Chairman Luetkemeyer. Thank you. The gentleman from North 
Carolina, Mr. Nickel, is now recognized for 5 minutes.
    Mr. Nickel. Thank you so much, Mr. Chairman. I am 
encouraged by this hearing, and I think it is worth pointing 
out that one of the areas I am very optimistic about in this 
Congress is getting bipartisan legislation done for immigration 
reform, and also include border security in that. So, I am 
hopeful that this is something we can accomplish in a 
bipartisan way.
    For our witnesses, thank you so much for being here. The 
focus on the southern border as the primary point of fentanyl 
trafficking, I think, is a little off the mark because it 
ignores that over 90 percent of fentanyl seizures occur at 
legal crossing points or interior vehicle checkpoints, not on 
migration routes or between checkpoints. While by no means 
should we minimize the issue of immigration, misstating the 
facts about what is being trafficked, where, and by whom, 
undermines our ability to address the cartels' criminal 
activities that have caused over 100,000 Americans to die in 
the last year that we have that data. It also draws attention 
away from the myriad of other methods that fentanyl, meth, and 
other drugs are trafficked into the United States.
    The place I have tried to start on this is just the size of 
fentanyl, just the small amount of it, and that, for me, is an 
important thing for the public to understand. Mr. Im, maybe you 
have some help with just the sheer size and the nature of it? I 
have this packet of sugar here that is 3.53 grams, and 
according to the DEA, just 2 milligrams of fentanyl is enough 
to cause an overdose. So, just this pack of sugar alone could 
be enough for close to 1,700 overdose deaths, is my math. Is 
that correct?
    Mr. Im. That is correct.
    Mr. Nickel. Do you have some way to quantify the size of 
fentanyl as it comes in across the border? I think you hear the 
debate. You hear about this, and my constituents certainly do. 
And you think this is like traditional drugs, large amounts of 
the material, but how do you talk about just the size of it?
    Mr. Im. That is the challenge that we are facing right now. 
That is why we can't get a better grip on this, and, again, it 
is not really about the drugs itself. It is about the network 
and the organizations that is actually producing it. It is 
about the chemicals that are being supplied out of China and 
India to the cartels. So, it does not matter how much, because 
as you stated, just that small amount can kill that many 
people. Then again, once it gets into the United States, they 
can take that small amount, adulterate it with other chemicals, 
and make more. And then, all of a sudden, you have an addicted 
population who want more of these drugs, and they will keep 
using it, and then they will ultimately end up perishing.
    Mr. Nickel. Sure. Thank you. You mentioned India, and that 
was sort of one of my follow-up questions. Certainly, China is 
an area we need to be really concerned about, but are there 
other source countries that we need to be concerned about now, 
where perhaps we can take action to prevent their future or 
deeper involvement in this deadly drug production?
    Mr. Im. Yes, we do see now, or we have or DEA has in the 
past, recently seen Chinese chemists moving into India to start 
or contine expanding precursor chemical production.
    Mr. Nickel. Thank you, and I yield back.
    Chairman Luetkemeyer. The gentleman yields back. The 
gentleman from Pennsylvania, Mr. Meuser, is recognized for for 
5 minutes.
    Mr. Meuser. Thank you very much, Mr. Chairman. Fentanyl is 
illegally entering our country and killing over 100,000 of our 
citizens, particularly our young citizens. The amount of 
fentanyl seized since 2019 coming through Mexico has increased 
by 500 percent just in the last few years. Customs and Border 
Patrol estimates that it is the same level of increase that 
fentanyl getting through is equivalent. So, Mexico has become a 
narco-state, as sad as that is. Mexican cartels make as much as 
$50 billion to $60 billion a year from drug trafficking. We 
know the Mexican president does not take this crisis seriously. 
The question is, do we? Does the Biden Administration and the 
Department of Homeland Security?
    I have a coroner in Schuylkill County, Pennsylvania, Doc 
Moylan, who gave a quote: ``Our small county of 140,000 people 
has been battered by fentanyl deaths. We are consistently 
having close to or exceeding 100 deaths per year, and fentanyl 
is the leader on the list, and if it is not the leading cause, 
it is typically somewhere in the system, and it is devastating 
our whole community. One thing that is overlooked is that the 
parents are dying of these drug poisonings and grandparents are 
being left to raise their grandchildren. Something must be 
done. We are all border States.''
    I am going to change my questioning around a little bit, 
and, Mr. Cassara, I would like to start with you. If you were 
the Secretary of Homeland Security, what would you do first?
    Mr. Cassara. Two priorities. Number one, we talked about 
controlling the border. The second priority is to emphasize 
following the money. Take away assets; that will hurt the 
criminal organizations more than anything else you could do.
    Mr. Meuser. On a scale of 1 to 10, Mr. Im, how effectively 
are we doing at securing the border, in your view, and 
investigating the assets?
    Mr. Im. On a scale of 1 to 10, it would be a 5 or a 4.
    Mr. Meuser. Okay. Thank you. If you were the Secretary of 
Homeland Security, what would you do to stop this situation or 
slow it, mitigate it?
    Mr. Im. Muster up the entire whole of government, find one 
central authority, create an action plan, and start going after 
all of these cartels, influencing these governments with trade, 
because that is what is going to hold them to enforcing their 
own laws, because it is all about money. Whether it is in 
legitimate commerce, or illicit activities such as drug 
trafficking, money laundering, or human trafficking, it is all 
about the money.
    Mr. Meuser. Okay. Professor Realuyo, same question to you, 
if you were the Secretary of Homeland Security?
    Ms. Realuyo. Most importantly, it is our human and 
technological resources. We actually have the wherewithal, we 
just don't have enough people, and this is a problem. And I 
know that the U.S. has actually forward-deployed Homeland 
Security agents. I was just in the Darien Forest, in the 
jungle, and it's amazing work that our people are doing, but 
there are just not enough HSI agents down there, and that is 
actually where we are seeing what we call extra-continental. 
This is where they are intercepting. They caught Iranians 
recently, and Somalis. This is what is of concern to us. This 
terror-crime nexus that I have written about for the last 15 
years is a true national security threat.
    So, we have to beef up resources, and then, more 
importantly, we have to go after the money going down range. We 
are looking at Homeland Security things, so look at what is 
coming in, but we are still the number-one exporter. As John 
and I have worked on, bulk cash smuggling continues because our 
consumers continue to buy drugs with hard dollars. There are 
all of these innovative new ways of moving money through 
cyberspace, but hard cash is still--
    Mr. Meuser. Do you think we can get the Mexican government 
to cooperate with us, to work with us?
    Ms. Realuyo. We have seen ways in the previous 
Administration, how the threat of sanctions, or, more 
importantly, tariffs--at that time, it was a little different, 
because we were negotiating the renewal of NAFTA--were actually 
ways that we tied aid, and carrots and sticks. And I think 
using sanctions also against China could be a very innovative 
way to hold both the Mexicans and the Chinese accountable 
because their governments are acquiescing and allowing this to 
take place.
    Mr. Meuser. Thank you. Mr. Grellner, same question?
    Mr. Grellner. Certainly. I think one of the big things is 
getting the U.S. involved. It was striking to me this morning 
when I walked in, the number of people who are here from the 
media, not about a million dead Americans, but about whether or 
not we are going to do something with TikTok.
    Mr. Meuser. I noticed that, too.
    Mr. Grellner. That is one of the biggest problems that we 
have. People believe that those who are dying are just drug-
addled addicts lying on our streets, and they are not. They are 
U.S. citizens.
    Mr. Meuser. Ms. Peters, I only left you 9 seconds, but if 
you wouldn't mind?
    Ms. Peters. It is okay. I actually would agree with what 
John Cassara said. I would also like to refer to a comment that 
Chair McHenry made: We need to change the incentive structure, 
and that is something over which this committee has some 
control. I want to see agencies get more money if they can put 
drug trafficking networks out of business, and they can take 
their money away instead of giving promotions and increased 
budgets for arrests and seizures.
    Mr. Meuser. Thank you. I am out of time. I yield back, Mr. 
Chairman.
    Chairman Luetkemeyer. Thank you. Now, we recognize the 
gentlewoman from Colorado, Ms. Pettersen.
    Ms. Pettersen. Thank you, Mr. Chairman. I want to thank you 
for leading this very important discussion, as well as the 
ranking member. This is a topic that is very important to my 
district in Colorado and also to me personally. Since I am new 
and you all don't know my story, I have seen firsthand the 
failed policies at the Federal level every step of the way, 
from the beginning of the opioid crisis, where doctors were 
provided incentives for overprescribing, to ultimately cutting 
people off of their prescription drugs without access to the 
treatment that they need, and then fentanyl starting to come 
into our supply chain starting in 2014, hitting the coasts, and 
then coming in to Colorado in 2016.
    When I was just 6-years-old, my mom hurt her back. She went 
to the doctor and was sent home with bottles upon bottles of 
opioids, and that is where my childhood took a very different 
turn. She became wildly addicted to these prescription drugs, 
and later was cut off from her access to those prescription 
drugs. And like so many people struggling with addiction, my 
mom always said that the thing that she feared most was 
withdrawal, not death. And she went to using, trying to fill 
her need with the disease that she was struggling with, with 
using heroin and, ultimately, fentanyl sort of coming into the 
supply chain in 2016, where my mom thought she was getting 
heroin and, unfortunately, that was laced with fentanyl, like 
so many people have experienced today.
    She started overdosing at a very high rate. That year, it 
was 20 times the cost, every level of government trying to keep 
my mom alive while being turned in and out of the ER without 
anywhere to send her for treatment, begging for help. The State 
of Colorado and the Federal Government spent over a million 
dollars just keeping her alive in the ER while she was begging 
for a place, with nowhere to go. As a State legislator, I took 
that experience fighting to save my mom's life to change the 
system in Colorado and increase access to the critical services 
that these people need.
    So when I think about how vulnerable we are as a country, 
because you all have talked about the stigma that exists, the 
barriers that we face, that they are just addicts and we don't 
have to actually care about their deaths. The fact that the 
media is here covering TikTok, instead of the thing that has 
killed more people in the United States than all of the world 
wars combined, I feel like I am screaming in an empty hall all 
the time, trying to bring attention to this issue. So, I just 
want to thank you for your work in focusing on this and I'm so 
excited to be a part of this committee.
    This time is going by way too quickly. But one of the 
things that we have seen in Colorado is just a lack of access 
to the dedicated treatment and support so that people actually 
get the health care that they need. But also when we look at 
the distribution--you mentioned the social media companies. 
This is why kids are dying, not knowing that they are actually 
taking fentanyl and dying from poisoning. We took the first 
step in Colorado for recommendations from the attorney general, 
but we need a national effort here. They should be held 
accountable for knowingly distributing drugs across our 
communities.
    I also just want to recognize the parents in this room who 
have lost their children to fentanyl overdoses. I can't imagine 
your pain. I have a 3-year-old son, and when I think about him 
growing up in the United States where he could make a bad 
decision one day and be at risk of dying, it is terrifying as a 
parent.
    I guess one of the big barriers that we have in Colorado 
that we identified is also that our State and local law 
enforcement are not working together. In fact, our law 
enforcement agencies at the local level don't even communicate 
with each other. And a question that I have is, what do we need 
to do to help support that interaction, get our State involved, 
get our local law enforcement working in tandem so that we are 
actually addressing the cartels and distribution at the State 
level? And then, I think that we have talked in depth about 
what we need to do at the Federal level around the DEA.
    Mr. Grellner, can you talk about what we can do? Oh, no, I 
am already out of time.
    Mr. Grellner. I will just say quickly, thank you for your 
thoughts, and say that I want you all to understand one thing: 
fentanyl is not just one drug. There are over 2 dozen fentanyl 
concoctions that the DEA has already listed as List I 
chemicals. And, Mr. Chairman, you talked about it being 50 to 
100 times stronger than morphine equivalents. Carfentanil is 
1,000 times stronger, so when you talk about milligrams, we are 
talking about micrograms.
    Chairman Luetkemeyer. Thank you. And thank you for your 
compelling story, Ms. Pettersen. I appreciate that.
    The gentleman from Iowa, Mr. Nunn, is recognized for 5 
minutes.
    Mr. Nunn. Thank you, Mr. Chairman, and thank you to the 
Members for being here today. And I particularly want to pay 
tribute to those who are family members of the fallen in this 
epidemic that has become the fentanyl crisis, not just in the 
United States, but around the world. The trafficking of 
fentanyl has had major consequences in my home State of Iowa, 
particularly in the 3rd District. Even the august New York 
Times has written about how bad fentanyl has gotten in the 
small town of Osceola, just 30 minutes south of Des Moines, a 
community of 5,000 people. This drug does not discriminate, and 
it is harming people in all walks of life.
    I have been to the southern border. I have worked to combat 
human trafficking that transits Chinese-manufactured fentanyl 
around the world through our ports of entry through the country 
of Mexico and ends up in our communities. Like you, I have 
spent time on ride-alongs with my law enforcement and, as a 
former military member, flying operations along the southern 
border. Every community, every county, every city in my State 
is now a border community as a result of this.
    The Iowa Department of Public Health reports that over the 
last few years, they have seen a 34-percent increase in fatal 
overdoses, with fentanyl implicated in 83 percent of those 
Statewide. Among young Iowans, those 25 and under, drug 
overdose deaths have increased by 120 percent in the last 24 
months alone. We only expect these numbers to increase once new 
data is available, and the longer that we allow China to be the 
primary source of both fentanyl and the funding that operates 
this machine, the more danger we are all put in, and while this 
is a major problem, Congress needs to respond. So, I am 
thankful that this committee is helping us to follow the money 
on where this can best be directed.
    Mr. Im, I would like to begin with you, as a special agent. 
The USA Patriot Act, which was enacted after 9/11, included 
Title III, The International Money Laundering Abatement and 
Anti-Terrorist Financing Act of 2001. This title includes 
requirements to improve the government's ability to detect, 
prevent, and investigate money laundering. The Secretary, with 
a range of options, can use this to target specific money 
laundering operations, including what we are seeing here with 
the distribution of fentanyl. These tools help take proper 
action for the U.S. financial system to address these specific 
threats.
    I would like to ask you, sir, in your experience, is there 
sufficient evidence that Mexican banks are allowing cartels to 
set up accounts to hide and move the proceeds of fentanyl 
trafficking? And do you believe the Secretary of the Treasury 
should use the special measures provided in Section 311 to 
impose information gathering, reporting, and recordkeeping 
requirements on those financial institutions?
    Mr. Im. Yes, absolutely. Not only Mexican cartels own bank 
accounts, but also those businesses that are facilitating these 
cartels, and the Chinese businessmen who are actually in Mexico 
and throughout South-Central America, who are using these 
accounts to leverage these parallel funds transfers. That is 
continuing to fuel this entire crisis right now. Without the 
money, they can't continue producing these drugs. We need to 
cut the money off in the streets of the United States. And we 
are not doing as good of a job as we used to do, using the 
Patriot Act, using all the resources of the Treasury, to cut 
off the ability for these financial institutions in Mexico, 
China, and elsewhere. Whether a three-level sanction or an OFAC 
sanction, that is going to be one of the most-effective ways of 
strangling their ability to continue this crisis.
    Mr. Nunn. Mr. Im, I could not agree more, and the fact that 
we can have all the counter-drug programs here in the United 
States, until we cut off the funding supply, where this is 
coming from, we will continue to see the challenges. As one of 
my favorite figures from history, Winston Churchill, 
highlights, ``Those who fail to learn from their history are 
doomed to repeat it.''
    While fentanyl is new, there are clearly some lessons 
learned from the past that we can bring forward. Would you be 
able to share with us, just from your perspective, how the DEA 
went after Pablo Escobar,and some of the other success stories? 
There are things that we can use here in going after the 
financing behind fentanyl, both in Mexico and coming from 
China.
    Mr. Im. Thank you for the question. That is a great 
question. The DEA in South America, and specifically Colombia, 
at the time had the full support of the ambassador, the State 
Department, the intelligence community, and the military. They 
let the DEA do their job. The Department of Justice allowed the 
DEA to do their job and to go after these cartels one person at 
a time. Every single person we were able to arrest, we were 
able to use their information to convince them to cooperate to 
get to the next level, and use that evidence to get to the 
highest tentacles, and identify the accountants and the lawyers 
who were propping them up, the entire organization.
    The Cali cartel as well, we cut them off after we 
identified their money flow streams from the United States to 
Colombia. Once we identified their money facilitators, we cut 
them off from the cartel members, and sanctioned the Cali 
cartel front businesses, the entire businesses. They own the 
so-called, ``CVS of Colombia.'' We cut that off after OFAC and 
DEA helped sanction those companies. Now, they have no funds.
    Chairman Luetkemeyer. The gentleman's time has expired.
    Mr. Nunn. I yield back. Thank you, Mr. Chairman.
    Chairman Luetkemeyer. The gentleman's time has expired. 
With that, I recognize the gentleman from Illinois, Mr. Foster, 
for 5 minutes.
    Mr. Foster. Thank you, and I would like to yield the first 
minute of my time to Representative Pettersen, who has a story 
and a mission we should never forget.
    Chairman Luetkemeyer. The gentlelady from Colorado is 
recognized.
    Ms. Pettersen. Thank you. Thank you, Representative Foster. 
Just a last point about some of the frustration that I feel 
every day being here in Washington is we have not had any 
changes in our immigration laws. We have had increased asylum 
seekers from the instability in Central America and people who 
are coming to the border to flee violence. We know that most of 
these drugs are coming through the ports. When we think about 
what we are going to do to address this, it is actually looking 
at the data. We know that it is being distributed from Mexico. 
We have heard a lot about controlling the border. I guess, I 
get frustrated with the rhetoric as if somehow this is 
happening to the United States because of a change of 
immigration policy when, in fact, this is happening across the 
globe, and in 2014, it started seeping into our system, and 
then in 2016, into Colorado.
    So, can we work together to address where this is actually 
coming in, around the ports, around making sure that we are 
increasing, are bringing new technology to the border, because 
as Representative Nickel held up that little piece of sugar, 
the little packet of sugar, that is enough to kill, I think he 
said, 17,000 people. We need new technologies at the border. We 
need new technology investment at the ports. We also need 
additional screening in our mail system so we can address the 
supply side. And we also need to make sure that the United 
States is not so vulnerable by actually making sure that we are 
increasing access to treatment and recovery services, and going 
after the social media companies, not just going after, but 
holding them accountable.
    I just want to open it up to Mr. Cassara. I know you have 
talked a lot about controlling the border. Is this only 
happening in the United States? Were there changes in 
immigration policy you can point to, or is this just the new 
trend in drug trafficking because this is a lot more potent and 
easy to distribute?
    Mr. Cassara. Thank you. It is not just happening in the 
United States. There is an international scourge of what I call 
a trade fraud, for lack of a better definition. And I have been 
advocating for years now what I call trade transparency, both 
at the exporter and the importer, to combat things like trade-
based money laundering and trade fraud in general. As part of 
your question, you are also talking about technology. For the 
first time today, we have the technology to make this happen. 
We have the technology to make trade transparency viable, but 
what we do not have is the political will to do so.
    Ms. Pettersen. Thank you, and, Mr. Chairman, I yield back 
to Mr. Foster.
    Chairman Luetkemeyer. The gentleman from Illinois is 
recognized.
    Mr. Foster. Thank you. I would like to get some quick 
number estimates on this. Mr. Grellner, you indicated that the 
mark-up was about a factor of 5,000, that is, a $200 set of 
drug precursors coming from China eventually sells for a 
million dollars, so a factor of 5,000. Is it correct to infer 
that approximately only 1 part in 5,000 of the profits from 
street drug sales in the U.S. are going to China?
    Mr. Grellner. No, because you also have to factor in the 
money laundering.
    Mr. Foster. Right, which is really a separate independent 
industry, but when we think of it, if we just shut down the 
precursor factories, the problem will go away. That is where I 
am trying to get it. Back 15 years ago, we spent a lot of money 
trying to shut down poppy production in Afghanistan. We have 
spent billions of dollars, and at one point in a committee 
hearing, I asked the question, well, didn't the Taliban kind of 
do this experiment? They shut down poppy production. It had 
negligible effect on the street value.
    And what we will see, my suspicion is that because the 
precursors are such a small fraction of the eventual purchase 
price, will just go from China to India, which I take it has 
already started, or other countries, with a negligible impact. 
Is that a correct inference, that there is a limited amount 
that we can expect from even shutting down China's production 
and precursors?
    Mr. Grellner. No. I think what we are looking at is what we 
have always done is shuffled the money around here in the 
United States. So we say, oh, we are going to focus on 
rehabilitation, oh, we are going to focus on prevention, oh, we 
are going to focus on enforcement. We have to have a three-
legged stool. If you want the water glass to stand up on the 
stool, you have to fund all three legs--prevention, 
enforcement, and rehabilitation--at the same levels, and quit 
taking the money back when we make strides forward.
    Chairman Luetkemeyer. The gentleman's time has expired. The 
gentleman from Georgia, Mr. Loudermilk, is recognized for 5 
minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman, and thank you, to 
all of you for being here today. This is such an extremely 
important subject that has not been given the attention that it 
deserves and the American people are requiring that we give to 
it.
    Law enforcement agencies in towns and counties across the 
country, including in my own Georgia's 11th Congressional 
District, are on the front lines of the war against the cartels 
and those that are financially supporting them. These agencies 
have repeatedly urged Congress to take action to help them 
better coordinate with their Federal counterparts and stem the 
flow of money that fuels the fentanyl epidemic in our country.
    I would like to submit for the record, Mr. Chairman, the 
testimony of the National Sheriff's Association, which calls on 
Congress to use every means available to combat the atrocities 
committed against the United States and its people by the 
cartels and their financiers.
    Chairman Luetkemeyer. Without objection, it is so ordered.
    Mr. Loudermilk. Thank you, Mr. Chairman. Mr. Grellner, I 
have heard about some of the challenges law enforcement 
agencies in my home district face when dealing with complex 
drug trafficking cases and their local impact. Several of them 
that we have talked to have said that while regional Federal 
law enforcement agents are helpful, the more involved 
Washington gets in the case, the more difficult it is to get 
the information they need. Basically, the higher up the chain 
they go, the more difficult it is to work with the agencies. Is 
this consistent with your experience working with Federal law 
enforcement in the narcotics unit?
    Mr. Grellner. Not really. I will say this, that we fully 
funded the Regional Information Sharing Systems (RISS) network 
just after 9/11. And when we were fully funding the RISS 
network in the fusion centers, the interoperability between 
State, local and Federal law enforcement was at its peak in the 
United States, and we knew that was germane to the intelligence 
community in the United States. We need to go back to funding 
the RISS network so that we have the ability to move 
information from State and locals to our Federal partners, and 
our Federal partners back to State and local agencies.
    And we need, as Mr. Im said, to deputize more of our State 
and local officers to assist our Federal counterparts. DEA is 
the smallest enforcement branch of the Federal Government at 
the current time, and they need help from the State and local 
narcotics officers who work on this every day.
    Mr. Loudermilk. Are we still utilizing or operating the 
fusion centers?
    Mr. Grellner. We are, but not to the extent, again, that we 
were just after 9/11, after we stood up the RISS network. It is 
harder and harder because of the funding sources that have been 
brought back and drawn back in the RISS network to continue to 
work at the levels that we had worked at before.
    Mr. Loudermilk. My first term in Congress, I was on the 
Homeland Security Committee, so I did a lot of work with the 
fusion centers and with our local law enforcement on issues 
such as this. One of the issues they had when it came to 
communication and working with agencies was the lack of local 
officials having the proper security clearance to actually be 
engaged. Is that still an issue?
    Mr. Grellner. Normally, if the local officials are willing 
to work with the RISS network, it is usually very easy to gain 
access, as long as you have the proper credentials and work 
locally, again, with the Federal Government on that.
    Mr. Loudermilk. Okay, because part of the problem was that 
in the time it took to actually get a security clearance, the 
issue or the emergency was over with by that point.
    Mr. Grellner. Yes. My daughter works as an intelligence 
analyst for the DEA through our local St. Louis County Police 
Department, and she was able to get all of her clearances out 
of the way in just under 6 months.
    Mr. Loudermilk. So if I was to ask you what particular 
policy would be the most important for Congress to implement, 
would that be your answer, or do you have something else?
    Mr. Grellner. The answer is this. We have sat here this 
entire hearing and talked about how we know exactly what is 
going on. We can name the players. We can name the locations. 
We have satellites 2\1/2\ miles up in the air that can read our 
license plate numbers. We need the political will to put in 
place trade embargoes and agreements. We need to go after the 
financial institutions, and we know exactly where the poison is 
being made. This is not drug trafficking. This is an attack on 
the United States, and the minute that we understand that, we 
go at it as an attack on the United States. They are killing 
the people who are of fighting age in the United States if we 
are forced to go to war any time in the future, and we need to 
understand that and go after them as if that is occurring right 
now. The time to act was yesterday.
    Mr. Loudermilk. I don't want to put words in your mouth, 
but I want to make sure I understand what you are saying is 
that the front line of this battle is really within the 
jurisdiction of this committee for sanctions and going after 
the financiers?
    Mr. Grellner. Yes, sir, it is.
    Mr. Loudermilk. Thank you. I yield back, Mr. Chairman.
    Chairman Luetkemeyer. The gentleman yields back. With that, 
we go to the gentleman from Texas, Mr. Gonzalez, for 5 minutes.
    Mr. Gonzalez. Thank you, Chairman Luetkemeyer and Ranking 
Member Beatty. And I would like to thank the panel for being 
here today. Clearly, from listening to you this morning, there 
seems to be no lack of knowledge and information, and there is 
a lot of certainty on what the problem is and how to address 
it. There clearly is just a lack of political will here in the 
United States and in Mexico, and that is our fault. More needs 
to be done in Congress and through every Administration, 
regardless of what party is in power. This has been going on 
for way too long, and all I can address is issues that we can 
try to push here in this committee.
    And one of them that I would like to talk about is the Cash 
Apps, and the PayPals, and so much money. We catch bulk cash in 
my district on the border regularly, but I think a lot more 
could be done. I think we could use better technology on our 
ports of entry going down, and something that we should talk 
about is that over 90 percent of the fentanyl that comes into 
this country comes in through ports of entry. I know there is a 
fallacy out there that migrants are carrying it in backpacks, 
but that is just not true. It is coming in through ports of 
entry. It needs to be addressed aggressively at the ports, but 
what more can be done?
    I know these apps need to register at FinCEN, but some do, 
and some don't. Are we gathering data through DEA when we bring 
in defendants? When they are being debriefed, are we getting 
information of how they are moving their money, so we can 
address it further up and in Mexico and through our 
counterparts at FinCEN and in Mexico? This might be a question 
for the professor. What are we doing in Mexico to pressure 
their version of FinCEN and our counterparts to actively 
cooperate with us and follow the money and stop those money 
supplies?
    And I can't agree more with Mr. Im that we should be doing 
more through regular business, and I think sanctioning China 
and Mexico is certainly in order. But as I like to say, 
business is so darn good that we can't stop ourselves, and we 
keep looking the other way. But I think hopefully now, we are 
getting the attention that this issue deserves, and we will 
start addressing it with real policy on the Hill that can have 
a certain impact.
    Ms. Realuyo. We have done a lot of work in the last 20 
years, and it is great to be reunited with my teammates from 
post-9/11, John, and Gretchen, and Don. We are seeing the same 
problem: We are not following the money effectively. What we 
have been doing through technical assistance and foreign 
assistance is helping our partners help themselves. So, when 
AMLO, the president of Mexico, came to power, we anticipated 
that we were going to have problems with cooperation, because 
he has a very anti-American and very nationalistic posture,
    What we ended up focusing on, and you can see in the 
national security strategy, inside for the first time, we have 
a chapter specifically on transnational organized crime. And 
within that chapter, there is specific reference to fentanyl 
and financial intelligence, which is Bravo in terms of trying 
to understand the problem. And we were working with the AMLO 
team because they ran and won on an anti-corruption platform. 
You use the same tools to follow the money for corruption as 
for all types of crime.
    So we were working pretty well with, at that time, the head 
of the FIU to train his staff to understand what to take a look 
at, and we added a lot of the crypto and more of what was 
happening in the virtual world. Unfortunately, that person 
himself has been removed due to, let's say, questions of 
corruption, quite ironic, yet not surprising in Mexico, and 
sadly, we have seen that type of training reduced.
    Mr. Gonzalez. Excuse me for interrupting. Has cooperation 
diminished under this Administration with AMLO?
    Ms. Realuyo. Significantly, and it is sad. I have been 
working on this for 10 years. They won't even meet us, which is 
terrible. I was in Mexico last week, and we couldn't get access 
to a lot of what I would call kind of diplomatic meetings that 
are just kind of one of those ones where you check the box. We 
know where the laboratories are, we know where the routes are, 
and we have been sharing that intel and information with our 
counterparts for decades, actually with the Mexicans. 
Unfortunately, there is no political will to go after figures 
such as we did with El Chapo, and the DEA has tremendous 
challenges--
    Mr. Gonzalez. I agree with you completely.
    Ms. Realuyo. --to actually work there.
    Mr. Gonzalez. Before my time runs out, I want to ask Mr. 
Cassara, are we doing enough when we are debriefing these 
defendants, DOJ is debriefing and getting information of how 
they are moving money around and getting it to other agencies 
that can use that information to stop the flow of resources?
    Mr. Cassara. I don't believe we are. Once again, it all 
comes down to the money, and sometimes we forget to ask about 
the money. We get so caught up in the product and the people 
that we forget to ask about the money. And truly one thing I 
would like to emphasize is it all comes down to enforcement. 
All of these issues come down to enforcement. I think Don would 
agree with me, and others as well, that we really do have the 
tools finally, after 30 years of anti-money laundering programs 
and processes, but what we are lacking is people on the streets 
conducting investigations.
    Mr. Gonzalez. Thank you. I yield back.
    Mrs. Kim. [presiding]. The Chair now recognizes the 
gentlewoman from Texas, Ms. De La Cruz, for 5 minutes.
    Ms. De La Cruz. Thank you, Chairman Luetkemeyer and Ranking 
Member Beatty, for holding this hearing today, and thank you to 
the witnesses who are joining us. To the parents here, I want 
to give my condolences. No parent should ever have to bury a 
child, and so my heart is truly with you. I am a mother of two 
teenagers myself, and this is a fear. I am passionate about 
stopping the unprecedented amount of fentanyl that has been 
crossing our borders, I am passionate about stopping the 
unprecedented amount of illegal immigrants who have crossed our 
borders, and to you I say that I am with you.
    This stopping only truly comes when we stop the Biden 
Administration's open border policy. You see, you can't sell 
the drug if it is not coming across here, and you know what, 
Ms. Peters? I am angry too. I am angry that you have to come 
here time after time. I am frustrated by my colleagues across 
the aisle, some who lived just right next door to me. I am 
frustrated that they are acting like policy doesn't affect what 
we are seeing here with the unprecedented amount of fentanyl 
that is coming across. Policy is emboldening our cartels to use 
tools like social media to come across the ports of entry, 
between the ports of entry, and you want to know why? Because 
there is no consequence. There is no consequence.
    I am going to say that I agree with my colleague here, Ms. 
Pettersen. I agree that technology is one of the things that we 
can agree on that needs to happen on the border, but we can't 
ignore that policy, and bad policy is what is causing these 
damages. And let me give you some of the statistics, and this 
comes from this Administration. Just in Nueces County, in South 
Texas, the sheriff's department and CBP seized 3 gallons of 
fentanyl. They caught a coyote, a cartel member, bringing in 
over 3 gallons of fentanyl. That would kill 5 million people. 
That is 2\1/2\ times the size of Houston.
    Let me give you another statistic from the bad policy. The 
bad policy is, right now, we have a 1,221-percent increase in 
Chinese nationals crossing in the Rio Grande Valley sector in 
South Texas. That is just one of the nine sectors, and I am 
going to repeat that number: a 1,221-percent increase. The 
cartels charge $30,000 to $50,000 per Chinese person that they 
cross over. The regular national? It is $3,000 to $5,000. 
Again, why is this? Due to bad policy. This drains our Border 
Patrol resources. It takes us 4 hours to process each Chinese 
national, draining our resources again. So yes, technology is 
one of the things that we need, but we need good policy that 
allows us to have legal immigration, not encourage illegal 
immigration.
    Mr. Cassara, you are right. Criminals are motivated by 
money, and right here, I just gave you all the money, $30,000 
to $50,000 per Chinese national, when regular nationals are 
only $3,000 to $5,000.
    Mr. Grellner, I would like to ask you to explain how 
Congress could better coordinate with between Federal policy 
and local and State law enforcement.
    Mr. Grellner. Incentivize State and local law enforcement 
to help go after the money, incentivize sheriffs to lock up 
those crossing the border, and get back to paying those 
sheriffs a living wage to put those individuals in jails, so 
that they can be deported back to their home countries. And 
look, this has been going on since the 1800s. Personally, I 
don't care if you are Republican, Democrat, Green Party--I 
don't care. Just fix the problem. It has been going on for too 
long. Fix the problem, and policy is where it is at.
    Ms. De La Cruz. I yield back.
    Mrs. Kim. Thank you. I now recognize the gentleman from 
Tennessee, Mr. Ogles, for 5 minutes.
    Mr. Ogles. Thank you, Madam Chairwoman. Before I begin, I 
would like to request unanimous consent to insert four 
documents into the record. The first is a fact sheet from the 
American Foreign Policy Institute Center for Homeland Security 
and Immigration. The second is also from the FBI, highlighting 
the deadly consequences of fentanyl--
    Mrs. Kim. Without objection, it is so ordered.
    Mr. Ogles. All four? Thank you, ma'am.
    Ms. Pettersen, thank you for sharing your testimony, your 
story. Our hearts go out to you and your family for what you 
have been through, and we thank you.
    Overdose deaths in Tennessee have increased 200 percent in 
the last 5 years, most of those involving fentanyl. I am 
referring to the statement from the Wilson County Sheriff's 
Department and Narcotics Officer Fan. On March 6th of this 
year, a student at a local high school crushed up and took what 
they thought was oxycodone, also known as an M30 or a blue. As 
it turns out, it was a counterfeit fentanyl tablet. From 
February 7th of this year to March 2nd, there were 26 different 
narcotics operations, and in all 26 cases, the drugs tested 
positive for fentanyl substances.
    So as we go forward, the Chinese Communist Party is 
destroying American communities. Every small town in America is 
now a border town. They are inviting societal breakdown and 
tearing apart families. They are doing this intentionally and 
with the help of the Biden Administration, who can't bring 
themselves to realize that our border is not secure. 
Anecdotally, this past month, roughly 300,000 illegals crossed 
into our country.
    Let us look at the numbers from this fiscal year: 2,300 
pounds of fentanyl were seized by U.S. Customs and Border 
Patrol (CPB) last month at the southwest border, which 
represents a 238-percent increase from February of 2022. If 
fentanyl seizures continue at their current rate, in this 
fiscal year we will see the seizure of 26,400 pounds of 
fentanyl at the border, a figure that almost doubles the amount 
of fentanyl seized last fiscal year.
    The high demand for opioids in this country is being fueled 
by cartel access to our ports and our porous and open border. 
Our failure to secure our own sovereignty is creating a 
financial incentive for the Chinese Communist Party to kill 
Americans. Currently, 50 percent of Americans, according to 
Gallup, view China as our nation's greatest enemy, and it is 
about time that this Administration acknowledges it.
    Professor Realuyo, has weaker border security improved the 
ability of Chinese suppliers and money runners to profit from 
illicit fentanyl trafficking?
    Ms. Realuyo. The Chinese purveyors are actually critical to 
any type of drug, and it is not just fentanyl, by the way. In 
order to produce, as you know, heroin and cocaine, which is 
also now laced with fentanyl--you have actually seen them as a 
critical enabler--without the Chinese purveyors, and without 
the actual chemical base, the compounds don't exist. And this 
is actually why I have advocated to take a look at how do we 
sanction the Chinese, whether they be companies or financiers 
who are aiding and abetting and using things like the drug 
kingpin list? We have used them in the past. And I think you 
all know that in China, if you are caught for drug trafficking, 
the penalty is death, but we haven't really seen the execution 
of drug traffickers. And as we also know, nothing happens in 
China without the explicit knowledge and acquiescence of the 
PRC and the Chinese Communist Party, sadly.
    Mr. Ogles. Mr. Im, you mentioned the Cali cartel and how 
they were targeted and designated as a threat to our country.
    Mr. Cassara, when you look at the CCP, how they literally 
are profiting from the fentanyl precursors and the marketing 
thereof, just like the Cali cartel, if the CCP wasn't a state 
actor, would they be designated as a threat to our country?
    Mr. Cassara. They could very well be designated as an 
ongoing criminal enterprise, in my opinion.
    Mr. Ogles. Mr. Im?
    Mr. Im. Yes, we have identified literally hundreds of these 
chemical companies in China and throughout the provinces, in 
many ways subsidized by the provincial governors of those 
chemical companies. And we can help identify who those 
governors are, those bureaucrats are who help subsidize these 
companies that are actually conducting research and exporting 
these chemicals to the United States. And, yes, if we can 
provide that evidence, we can sanction them and we should 
sanction them.
    Mr. Ogles. Madam Chairwoman, I yield back.
    Mrs. Kim. Thank you. I now recognize myself for 5 minutes. 
As a mother and a grandmother, it pains me to see that our 
youth, the future leaders of this country, are being damaged 
the most by the fentanyl crisis. And according to HHS, the 
rates of illicit prescription pill use are now the highest 
among people ages 18 to 25. And to make matters worse, the DEA 
says that about 4 out of 10 illicit pills contain lethal doses 
of fentanyl, and I know you all know that.
    Before I go on, I want to ask for unanimous consent to 
insert a statement for the record from local law enforcement, 
the Orange County Sheriff's Department, as well as an article 
from the Orange County Register.
    Without objection, it is so ordered.
    Orange County Sheriff Don Barnes' statement states that 
from 2021 to 2022, seizures of fentanyl had more than 
quadrupled to 450 pounds, and his department also seized more 
than 405,000 pills that are suspected of containing fentanyl in 
2022, and that is 25 times the amount seized in 2021.
    Mr. Cassara, back in 2020, OFAC sanctioned Wan Kuok-koi, a 
member of the CCP, and a leader of the 14K Triad, which is one 
of the largest Chinese organized criminal organizations around 
the world. In your statement, you mentioned that criminal 
activity has become part of the CCP's overall strategy to grow 
its power. So, can you explain how trade-based money laundering 
works in practice, and from your experience, how does the CCP 
encourage this type of money laundering?
    Mr. Cassara. Thank you for the question. Trade-based money 
laundering, I believe, is the largest, most-prevalent money 
laundering methodology around the world. It is also the least 
known understood, and enforced. I talk about it in more detail 
in my written statement on pages 13 and 17. There are a variety 
of ways trade-based money laundering works, and there are a lot 
of different methodologies that are part of trade-based money 
laundering, for example, the black-market peso exchange, 
underground financial systems, export incentive fraud, and VAT 
fraud. All of this combined, as I said, makes it probably the 
largest money laundering methodology in the world. There is 
much we can do to combat trade-based money laundering, but we 
have not yet taken this seriously by our government and other 
governments as well.
    I would also like to call out the Financial Action Task 
Force (FATF). In the world of anti-money laundering and 
counterterrorism finance, it is the FATF that makes things 
happen or not happen. I strongly urge the FATF to enact 
Recommendation Number 41, which specifically targets trade-
based money laundering, and I urge our U.S. delegation to make 
sure that happens, and I would also urge our U.S. delegation to 
call out China for being a money-laundering center.
    Mrs. Kim. So, trade-based money laundering changed the 
advancements in technology and allowed Chinese and Mexican drug 
cartels to forge their businesses. Can you explain how that is 
possible?
    Mr. Cassara. Trade-based money laundering, think of it as 
value transfer, and we have had value transfer going back 
literally thousands of years, long before the advent of modern 
Western banking. This is wrapped up in, say, underground 
financial systems as well, for example, the Chinese Fei-chien 
flying money system that works very, very well. A lot of it has 
to do with, for example, hardworking immigrants wanting to send 
money back to their loved ones in China. We have no objection 
to any of that. Law enforcement certainly encourages 
hardworking immigrants to send their money back home, but what 
they have done is they are using a system developed back in the 
Tang Dynasty, if you will, back about 800, to transfer value in 
the form of trade goods.
    Mrs. Kim. I know I am running out of time, but I do want to 
ask you to please walk through how Chinese professional money 
launderers are carrying out the mirror scams, and the role 
Chinese banking apps play in facilitating money laundering from 
the sale of illicit drugs, if you can quickly respond to that?
    Mr. Cassara. We are talking about mirror accounts. What 
happens is you have bulk cash proceeds here in the United 
States, the proceeds of drugs. They only need to get that back 
to China. You have a Chinese broker working with a Chinese-
American businessman who is willing to cooperate. The 
businessman takes the proceeds of crime from the broker, and 
using their cash-intensive business, places the proceeds of 
crime into the financial system. They do this for a commission, 
and the businessman transfers the equivalent amount of drug 
money through Chinese phone apps.
    Mrs. Kim. Mr. Cassara, I apologize. I asked the question, 
and you are giving a great answer, but I am going to ask you to 
submit your response in writing, because I want to be 
respectful of other Members who are here, and I already went 
over my time.
    At this time, I would like to recognize the gentleman from 
Kentucky, Mr. Barr, who is also the Chair of our Subcommittee 
on Financial Institutions and Monetary Policy, for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman. Thank you for your 
leadership, and thank you to Chairman Luetkemeyer for holding 
this hearing. And I want to thank all of the witnesses for 
testifying today on such an important and timely issue.
    I have seen firsthand the devastating impact of the 
fentanyl crisis in my district and across the Commonwealth of 
Kentucky. The most-recent drug overdose report from the 
Kentucky Office of Drug Control Policy reported that there was 
a 14.5 percent increase in overdose deaths in my home State, 
and according to cases autopsied by the Kentucky Office of the 
State Medical Examiner, and toxicology reports submitted by 
Kentucky coroners, the rise in the death toll was driven 
largely by an increased use in fentanyl, which accounts for 
approximately 70 percent of overdose deaths in my State.
    In Woodford County, Kentucky, in my district, a County with 
only 27,000 people, 9 individuals have been charged with 
trafficking fentanyl since 2016, and 6 of these individuals are 
charged with the death of another individual. We need to not 
only arrest individuals such as those in Woodford County who 
traffic this potent deadly drug, but also find and eliminate 
the source of production and financing. And when I talk to the 
narcotics officers in Kentucky, they are very unambiguous that 
this fentanyl is coming from our porous southern border, and 
the original source is China, and the Chinese are collaborating 
with the cartels, getting it through the trafficking channels 
up to Kentucky and killing our people.
    Let me just start with a question for Mr. Cassara and Mr. 
Grellner. In my district, officers who serve in the High 
Intensity Drug Trafficking Areas (HIDTA) are on the front lines 
fighting against the cartels and their fentanyl-trafficking 
activities. FinCEN, and Treasury, should be following the money 
in these areas to expose the relationships between the cartels 
and the illicit financing, which in turn, should lead to 
cutting off the funding of illegal fentanyl trafficking. Can 
you all elaborate a little bit about how FinCEN, in fact, does 
partner with HIDTA officers to catch money launderers and 
expose illicit financing activities, and how could FinCEN, and 
Treasury generally, do a better job working with HIDTA and 
other narcotics officers to expose these illicit finance 
channels?
    Mr. Cassara. Approximately 22 million pieces of financial 
intelligence are filed every year with Treasury's FinCEN. About 
4 to 5 million of those pieces of financial intelligence are 
suspicious activity reports (SARs). HIDTAs have access to this 
financial intelligence directly or indirectly through their 
members. To answer somebody else's question earlier, State and 
local law enforcement does have access to financial 
intelligence as well. I am no longer within FinCEN; I used to 
serve there, but no longer. FinCEN occasionally embedded a 
representative in the HIDTA task forces. I am not quite sure if 
they do now, but by and large, we have intelligence. What we 
are lacking, again, in my opinion, is people to use the 
financial intelligence to go out in the streets and make cases.
    Mr. Barr. Okay. So, you concur with that, Mr. Grellner, 
based on your--
    Mr. Grellner. I do, sir.
    Mr. Barr. Oh, you do, and pardon me, because of lack of 
time, I am going to move to Mr. Im on another question, because 
I think you have answered that. I see from your biography, Mr. 
Im, that you co-developed the first-ever OFAC SDN list 
sanctioning the Cali drug cartel in 1995. I have legislation, 
the Chinese Military and Surveillance Company Sanctions Act, 
that uses the OFAC SDN list to target the financing of military 
and surveillance companies that act counter to the national 
security of the United States. I am interested to hear your 
experience and views on using OFAC sanctions, and why the OFAC 
SDN list was the proper channel to sanction the cartel in 1995, 
and how this OFAC list could be used to target some of the 
producers of fentanyl production in China?
    Mr. Im. Yes, thank you for the question. It is most-
effective when they are most-vulnerable. If they have 
legitimate institutions and businesses that they rely upon, the 
legitimate banking systems and so forth, and for trade 
purposes, we are able to identify the evidence and information 
that they are committing illicit activities and crimes. 
Sanction is the most effective way to disable their ability to 
use the legitimate funding institutions and the Cali cartel 
businesses were most effective.
    Mr. Barr. Is OFAC sanctioning Chinese companies that 
produce the component parts of fentanyl now?
    Mr. Im. Onesies, twosies--they should be doing a much more 
robust job. We have given them enough information and evidence 
on 100 of these companies.
    Mr. Barr. That is a critical piece of testimony and a 
takeaway for this committee, and also for the Select Committee 
on China. I appreciate your testimony. And I yield back.
    Mrs. Kim. Thank you. The gentleman from Wisconsin, Mr. 
Fitzgerald, is now recognized for 5 minutes.
    Mr. Fitzgerald. Thank you, Madam Chairwoman. The first bill 
I introduced as a Member of Congress was to permanently 
designate fentanyl analogues as a Schedule I drug. At the 
beginning of this Congress, I again introduced the Stopping 
Overdoses of Fentanyl Analogues Act, which shares the same 
acronym, (SOFA), as the organization, Saving Others for Archie.
    The Badura family from Oconomowoc, Wisconsin, in the 5th 
District, lost their son, Archie, from a fentanyl overdose on 
May 15, 2014. Since then, his mother, Lauri, has dedicated 
herself to raising awareness of the dangers of drug addiction, 
really, not only in my part of the State, but throughout 
Wisconsin. And it is my hope that we can pass a permanent 
designation of fentanyl analogues to Schedule I this Congress, 
not only not to honor Archie, obviously, and the countless 
other victims of fentanyl overdose throughout the years, but to 
further underscore the entire mechanism in which fentanyl is 
being trafficked throughout the State.
    And I know that many of you have deep, deep expertise in 
this area. But we in Congress, I think, once again are seeing 
that the cartels--Sinaloa, Jalisco--are just deeply involved in 
their relationships with China, and it is not only in fentanyl 
production, but also, as we sit here today, the money 
laundering issue.
    I have a question for Mr. Im, and I know there will be a 
little bit of redundancy here, because I know this question was 
asked before, but one of the problems when you talk to law 
enforcement is just the tracking. And if you can get the 
tracking down, then you can follow the money laundering, and 
you can follow kind of, in particular, the increase in the 
encrypted communication apps, and the one that obviously most 
Members of Congress are focused on is WeChat right now. I just 
want you to comment, kind of in general, about other avenues or 
other ways that this money laundering might be happening 
outside of high tech as it exists right now.
    Mr. Im. Thank you for the question. They use both high-tech 
and traditional bulk currency movements. They rely on that. It 
is not just in the United States itself alone or in North 
America. It is also in Europe. Anywhere you have large bulk 
currencies of drugs or illicit proceeds, they are going to rely 
upon these pools of funds. Why? Because there is a transfer of 
wealth that is taking place outside of China in the billions, 
and they need technology such as these mobile platforms, such 
as communication platforms, such as WeChat, and Gmail, and 
Twitter, and all of these other type of communication apps and 
mobile payment apps, and the companies that own these 
technologies are aware of what is taking place.
    The question is, how much of an effort are they really 
making, how much investment and cost measures are they putting 
in there to increase their content moderation, to understand 
what the threats are? Most of the information is out there in 
the open. They can do much more. I am not sure how much money 
they are really investing in moderating this content and the 
threat. We have given them thousands of pages of documents. 
Most of it, or just about all of it is on social media or on 
the internet on open-source information, and they are still out 
there on their platforms.
    So, compel them to police their own activities. Law 
enforcement has a tough job of its own right now, okay? We need 
the Justice Department. We need prosecutors to prosecute to the 
fullest. Why? Because if they are not prosecuting even a low-
level distributor or a dealer, and that person is not going to 
cooperate because he is not getting the full sentence, there is 
no incentive for that person to cooperate for law enforcement 
to get to that next level and to the next level higher. It is a 
tool and an effective way for us to identify the top leaders of 
not only the traffickers, but also the money brokers. Every 
time DEA or other law enforcement seizes a Chinese courier with 
half a million or a million dollars in cash, they will just let 
them go, and then there is no incentive for that person who 
gave him that cash to cooperate.
    Mr. Fitzgerald. And that is why I think the foundation or 
certainly the simplest thing that Congress can do right now is 
to once again move towards making fentanyl a Schedule I. If we 
can get to that place, I think it would give prosecutors one 
more tool that they need right now to fulfill kind of the goal 
of getting fentanyl off the streets.
    I yield back. Thank you.
    Mrs. Kim. Thank you, and I would like to now recognize Mrs. 
Beatty.
    Mrs. Beatty. Thank you, Madam Chairwoman. It gives me great 
pleasure to announce that today, we have joining us Ms. Jones, 
who is the president of the National Coalition of 100 Black 
Women, and they have a special interest in education, 
healthcare, and drug trafficking. Thank you.
    Also, I would like to ask permission to put on the record a 
statement that I did not get to make, and I did have time left, 
but 10 seconds, in light of what Mr. Im and others have said 
about strangling the funding supply and what we should be 
doing. So, I would like the record to reflect that President 
Biden's Administration issued an Executive Order on imposing 
sanctions on foreign persons involved in global illicit drug 
trade, and also the Bipartisan Infrastructure Plan that 
included billions of dollars in funding for Border Patrol 
operations, the hiring of additional agents, and the technology 
to better defend space between the ports of entry. And lastly, 
the Anti-Money Laundering Act of 2020 and the Corporate 
Transparency Act. So we hear you, and the Biden Administration 
also hears you. Thank you, and I yield back.
    Mrs. Kim. Thank you, Mrs. Beatty.
    And I would like to also say a few words. Right across the 
hall, the CEO of TikTok is now testifying about the mental 
well-being of America's youth, and it has been reported that 
our sons and daughters purchase pills that are laced with 
Chinese-produced fentanyl from their own homes. Question to 
you, Ms. Peters. The pills purchased online are often cut with 
fentanyl to make them stronger, leading to poisoning of our 
youth, and oftentimes death. And I know personally a few youths 
from my own district, my high school, have died because of 
this, and drug dealers are purchasing the precursor chemicals 
from the CCP to make these pills, these fake pills. So from 
your point of view, are social media companies using all the 
tools at their disposal to prevent the sale of fentanyl pills 
to our children, and do you think AI could be implemented to 
take down drug sales more efficiently?
    Ms. Peters. Ma'am, thank you for the excellent questions. 
They are absolutely not doing everything they could be doing. 
Many platforms say that they are building AI to look for drug-
related content and remove it. In a lot of cases, they could 
use a simple code. The images I showed earlier had drug 
hashtags. You don't need special AI to look for that. 
Basically, if it says, ``buy or sell oxycodone pills,'' delete 
it and report it to law enforcement. That is not complicated 
AI, and I am not a tech person.
    There is a lot more these platforms could be doing. We have 
whistleblowers inside several Big Tech companies who have told 
us they have lost control of their platforms. They can't 
control it anymore because of the open way that they have been 
set up. The days for the tech industry to be allowed to self-
regulate and to police their own systems are over. I don't know 
how many more Americans have to die before Congress realizes 
that and starts to change the laws governing cyberspace.
    I have known everyone on this panel, except for Mr. 
Grellner, for years now. We have all studied money laundering, 
transnational crime, and criminal supply chains for years. I 
have switched my focus exclusively to social media because 
there is just so much of it going on, on our social media 
platforms, so this is really an urgent issue. And it is not 
just impacting drugs; it is involved in the spread of child 
pornography, human trafficking, child sex trafficking, the 
wildlife trade, antiquities, and all sorts of fraud and scams. 
This is causing all sorts of devastation.
    And we, for some crazy reason, allow our tech platforms to 
regulate themselves and consider everything that gets uploaded 
to be protected free speech when there is a way, I believe, 
that is relatively simple to define the difference between 
criminal conduct online and protected free speech. We are not 
trying to change the First Amendment. We are trying to define 
the difference between speech and conduct, and that is very 
possible. We ask you to get start doing it, please. Thank you.
    Mrs. Kim. Well said. That was a beautiful final comment in 
this very important hearing that we have had today. I would 
like to thank all of our witnesses for their testimony today, 
and all of the Members who asked great questions, and thank you 
for indulging us with your great responses.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    With that, this hearing is now adjourned.
    [Whereupon, at 12:20 p.m., the hearing was adjourned.]

                            A P P E N D I X

                            March 23, 2023

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                 [all]