Members of a Mexican drug cartel recently massacred American women and children in broad daylight. The attack was a tragic reminder that cartels continue to run rampant, leaving a trail of violence, sorrow and death. Traditional methods of eliminating these criminal organizations have not solved the problem. We need a new strategy that targets how these dangerous organizations fund their illegal activities. In the meantime, these cartels continue to fuel a public health crisis with 60,000 Americans dying each year to overdose and many more losing their livelihood to violence and addiction-related to illicit drugs.
Criminals use a practice known as trade-based money laundering (TBML) to move illegal goods and money funding their operation. It’s how drug cartels traffic both drugs and people. It is how rogue nations get around international sanctions and how the black market continues to thrive under our noses, and it’s why people keep dying.
Bad actors have used TBML to hijack international trade networks, largely unchecked, to move illicit goods and money by masking seemingly legitimate business transactions. Here’s an example of how criminals do it:
A drug dealer poses as a legitimate business and uses drug profits to buy $2 million in goods. He fraudulently invoices those goods at half the value and sells them to a Mexican drug cartel, which pays the dealer $1 million per the invoice. This invoicing practice allows the cartel to avoid duties on half the purchased goods and then sell those same goods on the open market for $2 million. The cartel smuggles $1 million in drugs to the dealer. The dealer injects them into our community. The cycle repeats itself.
The conventional war on drugs has failed. Targeting demand led to imprisoning millions of American citizens who suffer from addiction, resulting in stigmatization and lost lives without any real effect on the illicit drug crisis. Targeting supply by going after drug dealers and makers has created a game of whack-a-mole as promises of high profits continue to attract more of both. Illicit fentanyl, heroin, cocaine, and methamphetamine continue to contribute to our public health crises. Solving the drug problem requires a plan that erodes the cartels’ business model. We can do this by going after their financing by ending the practice of TBML.
TBML is a top national security threat, one that will not be easy to solve. Illicit drugs come into this country through ports, the southern border, and the postal service. By 2020, about 60 million shipping containers will pass through U.S. ports annually. The Department of Homeland Security (DHS) is tasked with monitoring all cargo bound for the United States. However, it is estimated that less than 1 percent of cargo containers are actively inspected. Our ports and customs agencies do not have the capacity to properly screen the sheer volume of goods, which creates a dangerous blind spot that cartels exploit through TBML.
The volume of undetected trade is not the only problem. The Department of Treasury handles invoices, and U.S. Customs and Border Protection handles manifests. These agencies do not share information, allowing for fraudulent invoicing techniques that TBML relies on.
We need an all-hands-on-deck approach that integrates trade and intelligence data, directs federal agencies to prioritize ending TBML by interagency efforts, includes private sector cooperation and innovation; and enhances collaborative efforts with international trading partners to identify, prosecute and curtail TBML.
One part of the TBML solution would be harnessing existing information technology with a publicly distributed ledger through blockchain technology. This ledger would integrate invoice and payment data with the manifest of the product or service that’s being traded. The ledger would be public and shared with trading partners so that all governments with a vested interest could contribute, monitor and benefit. Basing the ledger in the “cloud” would allow the United States to develop and other countries to share and use the collaborative information to reduce the money laundering aspect of the drug trade.
Without new solutions, the drug-fueled public health crisis affecting our country will continue to worsen. Too many Americans are dying from violence and overdoses caused by illegal drugs to ignore the financing mechanisms enabling the drug trade. As doctors, we recognize the need to be creative to address the vast issues affecting the health of our nation. Going after the cartels’ business model by addressing TBML is a new, workable solution to protect our communities.
Cassidy is the senior senator from Louisiana and is a member of the Finance Committee. Dr. Vanila M. Singh, MD, is a clinical associate professor at Stanford University Medical Center and former Chief Medical Officer for the U.S. Department of Health and Human Services and chairperson of the Pain Management Best Practices Inter-Agency Task Force as required by the CARA Act of 2016.