May 12, 2021

To Thwart the Illegal Narcotics Trade, Expose the Dark Economy


This spring, I began work as chair of the Senate Caucus on International Narcotics Control. The panel focuses on battling drug trafficking and improving cooperation with our international partners, and on the public-health aspects of narcotics use, including research into addiction.

To undermine the illegal narcotics trade, we must better understand the economics that drive it. In particular, we need to explore the dark economy servicing the narcotics market, and the “clash of civilizations” that forms its backdrop. This will be the Caucus’s focus under my leadership.

The United States has long seen itself as a City on a Hill. Despite repeated and serious challenges, our democratic institutions have been strong; our belief in those institutions has been steadfast; and our commitment to the rule of law has been enduring. This example has strengthened our leadership in the world beyond the might of our military or the strength of our economy. As President Bill Clinton said, the people of the world have been “more impressed by the power of our example than by the example of our power.”

Against our rule-of-law example stand authoritarians and kleptocrats who pillage their own people, and international criminal organizations that thrive wherever rule of law is weak. The clash between rule-of-law countries and this dark realm of international corruption, brutality, and criminality is a defining confrontation of our time. Most of the dangers America faces are spawned and nurtured in the dark realm: whether international terrorist networks, state-sheltered drug-trafficking conspiracies, or collapsed “failed states.”

The United States has two roles in this clash of civilizations. First, as the world’s primary example of the rule of law, we are a target. Kleptocrats and kingpins — the Vladimir Putins and El Chapos of the world — seek to counter and degrade our influence and values, to their own corrupt benefit. The clash pits our rule of law against those who spurn it; the American Century was built on a foundation they seek to erode.

Our second role in this clash is toxic, a form of self-harm: we aid and abet our enemies by offering their money sanctuary, protected by our rule of law. If you are a kleptocrat or criminal with billions of stolen dollars, outside our rule-of-law world your money is at risk of being stolen by the next bigger thief. We let our enemies hide their loot behind our rule-of-law protections. We give them financial aid and comfort.

The Cloak of Anonymity

Over the course of my time in the Senate, I have paid particular attention to the dark economy these foes exploit. I have helped victims of terror break through anonymizing covers and secure monetary damages they won in American courts. I am working to pass legislation strengthening our rules against bribes and other corruption abroad. Last year, after a long battle, Congress at last succeeded in passing my bipartisan reforms to help law enforcement look behind the screen of American shell corporations — entities with no real business purpose other than to cloak someone in anonymity.

The illicit drug trade has two sides: it sells a lot of drugs, and it collects a lot of money. We work very hard to attack the drug-distribution side of the business. We do less to “follow the money.” That drug money is a powerful element of the international dark economy. Drug-trafficking organizations move half a trillion dollars in product and profits around the world each year. We need to ferret out where the money is going, and clamp down on those who hide it.

The consequences of inaction are tragic: the U.S. Centers for Disease Control and Prevention reports that fatal drug overdoses in the United States have skyrocketed during the COVID-19 pandemic, rising to an estimated 90,000, including 402 in Rhode Island, the state I represent, during the 12-month span ending last September; opioid-related overdoses are up 36 percent over that stretch, with synthetic opioids, like fentanyl, up 55 percent. Much of the product causing these deaths was illicit.

Countering this devastation means dismantling the structures supporting it. That is why, as chair of the Drug Caucus, I plan to look at the shell companies, money laundering schemes, and other forms of illicit finance enabling smugglers and dealers.

The bill that passed last year empowered the Treasury Department and law enforcement to track the beneficial owners — the real people — behind American shell companies. We will ensure the Treasury Department swiftly and faithfully implements our legislation.

New Techniques for Laundering Drug Proceeds

U.S.-Mexico cooperation in combating drug-trade money laundering must improve. The U.S.-Mexico Merida Initiative targets money laundering, but our adversaries adapt quickly and we must keep up. Third-party money brokers use techniques like mirror swaps and trade-based money laundering to make life easier for cartels. We will need more study and coordination to address these problems.

The Biden administration has proposed stronger leadership by the international community to discourage and deter countries that provide shelter to international crime and corruption. I applaud that goal, and hope it becomes a priority commensurate with the clash of civilizations we now face.

And there is more we can do to strengthen rule-of-law countries against traffickers’ financial schemes. The Bank Secrecy Act requires big banks to protect themselves against illegal activity, but we let “gatekeeper” professions, like lawyers and real estate professionals, serve as entry points to our financial system for illicit funds.

Digital assets, such as cryptocurrency, open new avenues for drug traffickers to exploit. We should work with our international partners to set up a universal database to flag suspicious companies and transactions, and ultimately to shut down their operations if warranted. Mexico has a model that tracked 98 percent of suspicious, high-value transactions back to a single entity.

In the United States, overdoses and deaths ravage our communities. We need to update our national drug control strategy and expand our recent gains in prevention, treatment, and recovery services. I was proud to draft with Senator Rob Portman (R-OH) the first comprehensive addiction and recovery law, the Comprehensive Addiction and Recovery Act (CARA) of 2016, and then secure passage of core elements of our CARA 2.0 bill last year.

Next up is CARA 3.0, which would build on our previous success by investing further in prevention and providing additional resources for addiction treatment and recovery. We must also pass the TREATS Act, a bill to make permanent the more flexible telehealth services the Drug Enforcement Agency provided during the coronavirus pandemic to help more patients access medication-assisted treatment.

We cannot gain the upper hand in our global struggle against drug trafficking and corruption without confronting the powerful economics that drive them. We must recognize the clash of civilizations that pits our example of laws and values against adversaries who thrive in the shadows. We must shine light on the tools of those adversaries, penalize those who aid and abet those adversaries, and develop new means to uproot the dark economy. And for those walking the long, difficult, and honorable path of addiction recovery, we must always stand beside them. I look forward to helping the Caucus confront these difficult challenges.

By: Sheldon Whitehouse