The Western Hemisphere Drug Policy Commission: Charting a New

The Western Hemisphere Drug Policy Commission: Charting a New Path

Forward

Testimony by Shannon K. O’Neil, PhD

Chair, Western Hemisphere Drug Policy Commission

Council on Foreign Relations

House Foreign Affairs Committee

December 3, 2020

Congress created the Western Hemisphere Drug Policy Commission (WHDPC) to address

a dilemma that has long plagued US policymakers: why, despite aggressive enforcement,

have illicit drugs remained plentiful and increasingly potent while drug trafficking

organizations have grown stronger and more violent?

The failure to control drug abuse and drug trafficking has exacted an enormous human

toll. In the United States, more than 500,000 people have died from overdoses during the

past decade, soaring to an unprecedented 71,000 deaths in 2019.

Latin American

countries not only face growing drug usage but also epidemics of criminal violence that are

taking many more lives.

The illicit drug industry has evolved far more rapidly than our efforts to contain it.

Traditional dichotomies no longer apply. Developed nations both manufacture and abuse

synthetic opioids; developing countries both produce and consume dangerously addictive

plant-based substances. Throughout our hemisphere, the poor suffer most: those who are

socially and economically marginalized are more likely to develop drug use disorders and

more likely to be victimized by criminal gangs.

Organized crime – powered largely but not exclusively by illegal drug trafficking – also

threatens the region’s still fragile democracies. The most extreme example is Venezuela, a

democracy that has devolved into dictatorship, defying financial sanctions with the help

not only of other unfriendly states, such as Cuba, Russia, and Iran, but also of

transnational criminal organizations, including illegal drug and gold smugglers.

An increasingly complex threat requires a more agile, adaptive long-term strategy. We

need smarter international policies within an interagency effort led by the State

Department. This over-all effort should focus on accomplishing a fundamental foreign

policy goal: reducing the supply of dangerous drugs by helping partner governments in

National Center for Health Statistics ,“Drug Overdose Deaths in the United States, 1999-2016,”, NCHS Data Brief No. 295,

December 2017; National Center for health Statistics, “Drug Overdose Deaths in the United States 1999-2018,” NCHS Data

Brief No. 356, January 2020.; Brianna Ehley, “Fatal overdoses climbed to record high in 2019, reversing historic progress,”

Politico, July 15, 2020.

See Citizen Security in Latin America: Facts and Figures, Igarapé Institute, Strategic Paper 33, April 2018, p. 2, 8; Global

Study on Homicides 2019: Understanding homicide, (Vienna, Austria: United Nations Office on Drugs and Crime, 2019),

pp. 44-63.

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

Latin America counter vicious transnational criminal organizations.

This interagency effort must also address the challenge of money laundering. US

policymakers need to develop data-driven tools to detect and block the flow of illicit funds

using new techniques, such as cryptocurrencies and complex cross-border financial

transactions.

The White House Office of National Drug Control Policy should ensure that these policies

are cost effective, providing the executive branch with research-based analysis and

performance evaluations that measure both the positive and negative impacts of law

enforcement and foreign assistance.

No diplomatic challenge in the Western Hemisphere looms larger than Venezuela’s

descent into political and economic turmoil. A thorough evaluation of US and regional

efforts to resolve the Venezuelan crisis was beyond the scope of the Commission’s report.

The WHDPC recognizes, however, that the United States and its partners cannot control

the flow of illicit drugs from South America without halting the political and economic

meltdown in Venezuela and encouraging an orderly transition to stable, accountable,

democratic rule.

US counternarcotics policies

The Commission’s evaluation of US policy in the region shows promising results: our

assistance programs in Colombia are providing licit livelihoods in coca-growing regions;

our capacity building in Mexico has strengthened criminal justice reforms; and our police

reform, anti-corruption, and violence prevention efforts have helped the troubled nations

of Central America’s Northern Triangle – El Salvador, Guatemala, and Honduras – make

progress – albeit unevenly – toward more effective governance.

The United States and its partners have also strengthened anti-money laundering

regulations, collecting data that can potentially be used to uncover the financial networks

that perpetuate organized crime, corruption, and terrorism.

The shortcomings of US counternarcotics policies are obvious, however. Drug production

remains at historically high levels in Latin America as do drug overdoses (most of which

involve powerful synthetic drugs) in the United States.

US-supported counternarcotics policies can also cause considerable harm, complicating

rather than curbing drug trafficking and drug-related crimes. Coca eradication has moved

illicit crops to marginal regions, threatening vulnerable communities. Kingpin targeting

has fractured drug cartels, heightening inter- and intra-gang violence. Anti-money

Office of National Drug Control Policy (ONDCP), “New Annual Data Released by White House Office of National Drug

Control Policy Shows Poppy Cultivation and Potential Heroin Production Remain at Record-High Levels in Mexico,” Press

release, (June 14, 2019); Office of National Drug Control Policy, “ONDCP Reports Cocaine Production in Colombia is

Leveling Off,” Briefing statement, (June 26, 2019).

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

laundering efforts have spurred black and grey market innovations as traffickers and their

financial enablers move from bulk cash smuggling into elaborate trade-based schemes and

digital transactions.

Supply and demand

Two truisms about counternarcotics policy bear repeating: we cannot control the supply of

dangerous drugs without also reducing demand and we cannot curb demand without also

limiting supply. We may never end illegal drug trafficking, just as we cannot eliminate

substance abuse. But we can better manage these deadly problems with a comprehensive

strategy designed to address underlying causes and conditions, carefully measure

progress, and eliminate or mitigate adverse consequences.

US policy to reduce drug demand has evolved in recent years. Since 2010, Congress has

increased spending on treatment and prevention significantly, appropriating nearly

double the amount spent during the previous decade. Though funding remains

inadequate, policymakers understand the need for science-based approaches that treat

substance abuse as a disease, not simply a crime or moral failing.

Supply-side policies have changed little, however. The 2020 National Drug Control

Strategy still focuses on reducing potential drug production in Latin America and

increasing drug removals in the transit zones, despite little evidence that these outputs

will impact the desired outcome, i.e. increasing the price and purity of drugs available in

the United States.

Amid the economic havoc wreaked by COVID-19, it is more important than ever for the US

government to spend its counternarcotics budget effectively. The pandemic has

exacerbated conditions that are fuelling our ongoing opioid crisis, such as lack of adequate

treatment, economic distress, and social isolation. It is also likely to further weaken

security and justice institutions in the Latin American countries that produce drugs or lie

along drug transit routes.

Multi-faceted strategy

The Commission understands there are no quick fixes. The United States needs a long-

term strategy linked to its strategic objective: “drastically reducing the number of

Americans losing their lives to drug addiction.”

The federal government should apply the same scientific rigor to foreign supply-reduction

efforts: designing and implementing a cost-effective, interagency strategy with carefully

targeted policies to curb the flow of dangerous drugs into the United States while

See NDCS: Performance Reporting System 2020, pp. 21-28.

2020 NDCS, p. 4.

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

addressing institutional weaknesses in drug producing and transit countries that allow

transnational criminal organizations to flourish.

Drug trafficking and drug abuse are complex problems that require a multi-faceted, long-

term strategy that addresses not only demand and supply reduction, but also the broader

problems created by transnational organized crime, such as violence and corruption. To

deal with these issues effectively, a comprehensive strategy should be:

▪ Balanced. US efforts should address the supply and the demand for illicit drugs,

both at home and abroad.

▪ Shared. Transnational crime requires transnational solutions, with the US and its

partners jointly responsible for stopping trafficking, reducing corruption, and

addressing illicit drug consumption.

▪ Flexible. US agencies should have the authorities and the resources to respond

quickly to changing patterns of drug use and drug trafficking, collaborating with

our partners on country-led reforms to address country-specific challenges.

▪ Sustainable. US initiatives should be cost-effective with relevant long-term goals,

including measurable benchmarks to assess progress.

▪ Holistic. US policymakers should address drug trafficking as a subset of the many

illicit activities carried out by transnational criminal organizations that threaten

citizen security, foster corruption, and undermine US interests throughout the

hemisphere.

▪ Humane. US policies should above all promote public health, public security, and

human rights throughout the hemisphere. This means that policymakers need to

assess the harms of supply reduction polices when evaluating results.

The State Department

The State Department should be responsible for developing and coordinating interagency

policy to counter transnational organized crime. As the lead agency, the State Department

should prepare a whole-of-government strategy with three fundamental goals: 1) reducing

and interdicting the flow of drugs into the United States; 2) helping partner governments

in the hemisphere build effective, legitimate criminal justice systems; and, 3) curbing the

global demand for illicit drugs by leading an international effort to prevent and treat

substance use disorders with evidence-based public health policies.

Congress should provide flexible, multi-year funding streams for counternarcotics and

counter-transnational organized crime efforts, which can be re-allocated in response to

periodic evaluations conducted by field-based staff and independent experts.

The State Department also needs the authority to disburse emergency funds. Drug

trafficking is dynamic: in response to enforcement, traffickers can quickly move

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

production, adjust trafficking routes, develop new smuggling vehicles or methods, and

create new, more dangerous, products. The US government needs to become equally agile

in its response.

To implement this strategy, the Secretary of State should:

▪ Make the Undersecretary for Political Affairs responsible for

coordinating a whole-of-government effort to counter transnational

organized crime. The Undersecretary for Political Affairs should oversee the

Bureau of International Narcotics and Law Enforcement Affairs (INL) while

working with all relevant departments and agencies, including USAID, federal law

enforcement agencies, the US Treasury, and the Department of Defense to develop

and implement coherent regional strategies to reduce illicit drug trafficking,

disrupt criminal networks, and discourage money laundering.

Moving INL into Political Affairs (P), which manages overall regional and bilateral

issues, would increase organizational efficiency and ensure that these efforts

receive the high-level attention they deserve, both within the federal government

and partner governments.

The Undersecretary for Political Affairs should:

▪ Develop a five-year international drug control strategy with defined

annual goals in coordination with partner governments. This should include

regional and/or bilateral strategies for strengthening police and justice institutions

and promoting citizen security with clearly defined goals and benchmarks based on

both qualitative and quantitative evaluations.

▪ Work with the Office of Management and Budget (OMB) to prepare an

interagency drug control/law enforcement budget for interdiction and foreign

assistance programs.

▪ Work with Congress on long-term, flexible funding authorities. The

State Department also needs long-term funding and the authority to disburse

emergency funds. State should work with OMB and Congress to create a drawdown

counternarcotics account (similar to the Emergency Refugee and Migration

Assistance fund), which would permit INL to provide targeted assistance so that

partner governments can prevent or contain emerging threats.

▪ Replace the drug certification and designation process with more effective

tools to assess country efforts to counter transnational crime and sanction those

who fail to act. The current certification process offends our partners and does

little to deter corrupt practices in unfriendly nations. Instead INL should produce a

global report reviewing country efforts to counter trafficking and other

Bill Frelick, “Trump’s Budget Would Cut Crucial Emergency Aid,” Huffington Post, March 21, 2017.; United States

Conference of Catholic Bishops. “Funding the Refugee Program,” 2011.

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

transnational crimes, including US policies. This report should also assess whether

US sanctions, such as the Kingpin Act, effectively target the most dangerous

criminal organizations, especially those responsible for trafficking or producing

fentanyl and other highly toxic substances.

▪ Negotiate compact-based assistance programs based on the model

pioneered by the Millennium Challenge Corporation. The Undersecretary should

empower US ambassadors to work with partner governments on agreements that

identify shared goals for combatting organized crime, strengthening criminal

justice institutions, and protecting citizen security and human rights. The

agreements should specify the roles and responsibilities of both the US and host

governments, as well as civil society stakeholders.

This country-led process should bring the US government and other donors

together with political leaders and security officials to identify an appropriate, cost-

effective reform agenda. The resulting agreements should be made as public as

possible and include robust, transparent monitoring and evaluation mechanisms,

based on quantitative and qualitative indicators collected by both program

implementers and independent experts. These agreements should also include

commitments by host governments to implement vigorous anti-corruption

mechanisms and ensure transparency.

Congress should provide State with multiyear funding authorities for these

compacts, giving it the flexibility to tailor bilateral assistance to each country’s

commitments, needs, and capacities. It should also provide State with emergency

funds to help partner governments deal with emerging threats, particularly from

new psychoactive substances, such as fentanyl.

▪ Prioritize global efforts to treat and prevent drug abuse. The US

government should work with partners to establish a global fund to fight substance

use disorders. This is especially urgent amid the Covid-19 pandemic, which is

amplifying risk factors associated with drug abuse while limiting access to

treatment. Supply and demand reduction measures are mutually reinforcing; the

United States cannot limit the international supply of illicit drugs without

simultaneously reducing international demand.

USAID’s Bureau for Global Health should lead this effort, working within the

framework of the successful Global Fund to Fight AIDS, Tuberculosis, and Malaria.

The stigma attached to drug abuse often prevents addicts from seeking treatment,

just as stigma used to prevent HIV/AIDs sufferers from receiving treatment. A

global effort could help eliminate these barriers while promoting cost-effective

medication-assisted treatments.

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

The White House Office of National Drug Control Policy (ONDCP)

Congress established the ONDCP in 1988 to develop an interagency counternarcotics

strategy and oversee drug-control budgets. The law specified that the ONDCP’s strategy

should include “comprehensive, research-based, long-range goals for reducing drug

abuse” along with “ short-term, measurable” objectives.

It is the White House office that

bridges foreign and domestic counternarcotics policies, including both supply- and

demand-control efforts.

The ONDCP has rarely lived up to expectations, however. Its ability to coordinate and

implement a national drug control strategy hinges on its authority to decertify agency

budgets, a power it has exercised only once.

Compared to the Office of Management and

Budget (OMB), the ultimate enforcer of presidential priorities, the ONDCP ’ s influence

over White House domestic and foreign policies has been minimal.

The Commission recommends that the ONDCP function instead as the president’s chief

advisor on counternarcotics, providing objective, reliable information about which policies

are most effective. It should also serve as the president’s forum for managing both supply-

reduction and demand-reduction polices, ensuring that options are fully analyzed before

reaching the White House. It should evaluate ongoing efforts and monitor trends to

anticipate drug risks before they become full-blown epidemics.

The ONDCP needs to develop more effective measures of supply-control policies, most of

which still focus on plant-based drugs. While demand-side efforts have benefitted from

public health research, there is a dearth of research on supply-side measures. For

example, the 2020 National Drug Control Strategy (NDCS) focuses on reducing drug

availability as reflected by purity-adjusted prices, although the impact of supply

interventions (such as eradication and interdiction) on these prices, which have fallen or

remained stable over the past decade, remains unclear.

Moreover, the ONDCP’s long-standing goal of reducing purity-adjusted prices does not

address the problem of heroin or cocaine adulterated with fentanyl and other psychoactive

substances. A more appropriate goal may be to reduce drug toxicity by focusing law

enforcement on disrupting fentanyl supply chains.

The ONDCP should also consider the harm caused by law enforcement efforts both abroad

and at home. Performance measures should include indicators that measure both the costs

and benefits of law enforcement strategies, such as whether crop eradication, drug

interdiction, and kingpin targeting outweigh the social, economic, and political costs to

our partners.

H.R.5210 - Anti-Drug Abuse Act of 1988.

The ONDCP has publicly decertified an agency budget only once: in 1997 Barry McCaffrey instructed the Defense

Department to resubmit a larger anti-drug budget to the OMB. President Clinton increased the military counternarcotics

budget, though not as much as the ONDCP had requested. See “The General and the “War” on Drugs: Barry McCaffrey and

the Office of National Drug Control Policy, “ Kennedy School of Government Case Program, Harvard University, 1998.

Bryce Pardo, “Considering the Harms: Drug Supply Indicators,” April 2020, white paper prepared for the WHDPC, p. 20.

Pardo and Reuter, p. 3.

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

To make the ONDCP more effective, the President should:

• Require the ONDCP to develop new supply control performance

measures. The ONDCP should support the State Department by convening an

interagency task force to develop new long-, medium-, and short-term metrics. The

supply-control indicators in the 2020 NDCS – potential production of plant-based

drugs (cocaine and heroin), cocaine removals in the transit zone, and drug seizures

at the US border and points of entry – focus principally on plant-based drugs.

The

ONDCP needs to work with implementing agencies to develop and test new

performance measures linked to its primary objective: saving lives. This means

measuring not just the price and purity of illicit drugs, but also their toxicity.

• Incorporate cost-benefit analysis into drug control strategy. The ONDCP

should work with implementing agencies and partner governments to evaluate the

second and third-order effects associated with both drug trafficking and law

enforcement efforts at each point in the drug supply chain.

A cost-benefit analysis

should weigh the ecological and social harm caused by both coca cultivation and

crop eradication in Colombia; evaluate the impact of interdiction on drug flows,

and explore the relationship between kingpin targeting and criminal violence in

Mexico.

• Direct the ONDCP to work with the interagency to collect timely data

on emerging drug trends. The ONDCP cannot develop proactive, evidence-

based metrics without real-time data, especially on highly toxic synthetics. The

ONDCP should take the lead on assessing technologies, such as wastewater testing,

to monitor the spread of synthetic drugs to new markets. It should work with both

law enforcement and public health authorities to find more effective ways to share

intelligence and toxicology data from postmortems or hospital emergency

departments. It should also assess whether US law enforcement and foreign

partners are effectively targeting fentanyl trafficking networks.

• Provide the ONDCP with discretionary funding for research to counter

regional illicit drug networks. Congress should give the ONDCP additional

resources for research grants to study the impact of law enforcement efforts both at

home and abroad. These grants could be used to apply innovative law enforcement

practices to counternarcotics policy.

For example, focused deterrence, which has

been used successfully in the United States to prevent gang violence, could also be

National Drug Control Strategy: Performance Reporting System 2020 (Washington, DC: Office of National Drug Control

Policy, February 2020), pp. 21-22.

See Bryce Pardo, “Considering the Harms: Drug Supply Indicators,” April 2020, white paper prepared for the WHDPC.

On focused deterrence see the Rand Corporation’s “Focused Deterrence Strategy Guide.” On how this strategy could be

used to deter fentanyl trafficking, see Bryce Pardo and Peter Reuter, Enforcement Strategies for fentanyl and other synthetic

opioids (Washington, DC: Brookings Institution, June 2020).

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

applied in cooperation with Mexican state and local law enforcement to deter

fentanyl production.

Anti-Money Laundering/Counter-Terrorism Financing

Money laundering requires at least as much ingenuity and innovation as smuggling itself,

using methods that range from simple bulk cash smuggling to complex foreign trade-

based transactions to digital mechanisms such as cryptocurrencies. And it requires legions

of enablers or gatekeepers to the legal economy. Just as cartels employ mules to carry

drugs, engineers to build tunnels, and hitmen to eliminate rivals or informants, they also

hire accountants, lawyers, real estate brokers, auditors, and other financial agents to move

and hide their profits.

Criminal organizations, rebel groups, and terrorists thrive in similar contexts: countries

where the state is fragile and easily corrupted, where there are vast ungoverned spaces, or

whose citizens suffer from high rates of poverty and inequality, exacerbated by racial or

ethnic tensions.

Where trafficking and armed political groups coincide, the combination is especially

dangerous. The Tri-Border Area (where Argentina, Brazil, and Paraguay meet) has long

been a smuggling hub, which provides money laundering opportunities for a variety of

criminal groups, including drug traffickers and international terrorist groups, such as

Hezbollah.

In Colombia, dissident elements of the Revolutionary Armed Forces of

Colombia (FARC) and the Army of National Liberation (ELN) not only smuggle cocaine

but also engage in illegal gold mining.

Venezuela provides a haven for these groups,

while its leaders profit from drug and gold smuggling.

High costs, low results

Anti-Money Laundering/Combating the Financing of Terrorism (AML/CTF) laws have

grown increasingly robust. They also entail considerable costs to business. A 2016 study

estimates that compliance costs US companies anywhere from $4.8 billion to $8 billion

per year.

There is an incentive to overreport: failure to file suspicious activity reports can

result in both substantial financial penalties and damage to the bank’s reputation.

See Iran in Latin America: Threat or ‘Axis of Annoyance, The Woodrow Wilson Center, Eds. Cynthia Arnson, Haleh

Esfandiari, and Adam Stubits, 2008; “Is the Trump Administration Exaggerating the Threat of Hezbollah in South

America?” World Politics Review, Sept. 5, 2019. Critics contend the region’s importance to Hezbollah is exaggerated.

For more on official support for Colombian drug traffickers, see Evan Ellis, “Venezuela: Pandemic and Foreign

Intervention in a Collapsing Narcostate,” Center for Strategic and International Studies (CSIS), Aug. 5, 2020; “Containing

the Border Fallout of Colombia’s New Guerrilla Schism,” International Crisis Group, Sept. 20, 2019; and, Javier Corrales,

“Authoritarian Survival: Why Maduro Hasn't Fallen,” Journal of Democracy, vol. 31, no. 3, July 2020, pp. 39-53.

David R. Burton and Norbert J. Michael, “Financial Privacy in a Free Society,” Backgrounder, The Heritage Foundation, September 23,

2016.

Dr. Shannon O’Neil House Foreign Affairs Committee

WHDPC, Chair Dec. 3, 2020

Given the enormous amount of dirty money circulating in the global economy and the

variety of businesses and institutions involved in laundering it, enforcement is remarkably

lax.

Successful money laundering prosecutions, which can be extremely complex and

time-consuming, remain relatively rare. The value of illicit proceeds seized or frozen is

minuscule in comparison to the magnitude of money laundering within the international

financial system.

The federal government spends very little to analyze and operationalize financial

intelligence. In FY 2020, the US Treasury’s Financial Crimes Enforcement Network –

FinCEN – had a budget of about $126 million and a staff of 300.

Congress should provide the US Treasury Department with additional resources to:

▪ Strengthen FinCEN: The US government has increased AML/CTF regulations,

collecting enormous amounts of data, but the system is under-resourced and

overwhelmed. FinCEN’s small staff lacks the capacity to analyze existing

intelligence or to anticipate new and emerging threats. Providing FinCEN with the

leadership and resources needed to gather, protect, and analyze financial

intelligence should be a priority.

▪ Use research to improve regulations and facilitate investigations.

Establish a database of money-laundering cases that can be shared among law

enforcement agencies, describing prices and methods along with the predicate

crimes involved.

This would allow regulators and investigators to make better use

of existing data, especially the information generated by suspicious activity reports.

▪ Promote innovation in both the public and private sector: Regulators

should work with financial institutions to make anti-money laundering reports

more effective and efficient by encouraging innovative practices and sharing best

practices. The US government should also encourage the private sector to improve

the quality of reporting by focusing on priority risks and by providing up-to-date

information about newly identified threats and vulnerabilities.

Illicit financial flows include the proceeds of all illegal activities, including drugs, arms and human trafficking as well as

bribery, tax evasion and other forms of corruption. They also include funds used to commit crimes, such as terrorist attacks.

US Department of the Treasury, Financial Crimes Enforcement Network Congressional Budget Justification and Annual

Performance Plan and Report FY 2021, p. 4.

See Reuter and Truman, Chasing Dirty Money, p. 8.