Watchdog: DEA lacks oversight of money laundering operations - InfoNews

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Watchdog: DEA lacks oversight of money laundering operations

FILE - This June 13, 2016 file photo shows Drug Enforcement Administration (DEA) agents in Florida. On Friday, Feb. 21, 2020, the FBI arrested U.S. federal narcotics agent Jose Irizarry and his wife, Nathalia Gomez Irizarry, at their residence in Puerto Rico, according to a law enforcement official familiar with the arrest. He has been charged with conspiring to launder money with the very same Colombian drug cartels he was supposed to be fighting. (Joe Burbank/Orlando Sentinel via AP, File)
June 17, 2020 - 10:56 AM

MIAMI - The U.S. Drug Enforcement Administration failed to effectively oversee and manage undercover money laundering operations that move tens of millions of dollars of illegal drug proceeds each year through a network of government-approved fronts, according to a watchdog report.

The inspector general's findings, contained in a report published Tuesday, add to concerns about the potential for fraud and abuse of the important crime-fighting tool that were laid bare in the recent indictment of a former star agent, Jose Irizarry, for allegedly conspiring with the same Colombian drug cartel he was tasked with fighting.

While Irizarry's alleged crimes aren't mentioned in the report, criticism of the undercover operations he helped lead dates back years. Nearly a decade ago, then-U.S. Rep. Darrell Issa, chairman of the House Oversight Committee, accused the DEA of “aiding and abetting cartels” and blasted the operations as “a high-risk strategy with scant evidence of success.”

The new report suggests that a number of deficiencies remain, including weak oversight from the Justice Department of what are supposed to be tightly monitored stings, loose record keeping to evaluate results and lax control of confidential sources working for the cartels. The audit also faulted the DEA for failing to submit annual reports to Congress about the undercover operations, saying the agency has not done so since at least 2006.

“There is limited Congressional insight into the DEA’s use of this investigative technique involving certain authorized undercover illegal activities and the benefits it provides to the American taxpayer,” the report says.

For decades, so-called attorney general exempted operations have required approval at the most senior levels of the Justice Department. Through them, the DEA becomes an active part of money laundering schemes with the aim of targeting high-level traffickers. Agents follow the money by opening front businesses, buying property and depositing funds into banks to facilitate transactions on behalf of drug trafficking organizations.

The extent of the DEA’s involvement moving dirty money is unknown but believed to be only a small part of the annual $64 billion in drug trafficking activity in the U.S. The 72-page report is redacted to exclude the amount and size of financial transactions carried out by the undercover operations.

However, the DEA says that the 16 operations reviewed by the inspector general — 31% of the total that existed during the audit period — contributed to seizures totalling $1.4 billion in cash and assets, 83 tons of cocaine, 782 kilograms of heroin or fentanyl and more than 1,400 arrests in the United States and abroad.

The DEA agreed with the inspector general’s 15 recommendations, and said it already has updated its policies twice since the audit period — fiscal years 2015 to 2017 — to address the report's concerns and improve oversight of the money laundering operations. It has also added annual training conferences for investigators involved in the program.

“Significant progress has been made in recent years and that effort continues today,” the DEA said.

Bonnie Klapper, a former federal prosecutor in New York, said the inspector general's criticism did not go far enough, saying it failed to address “myriad abuses” within the undercover money laundering operations.

“Chief amongst those abuses is continuing to launder vast sums of money without actually making cases,” Klapper told The Associated Press.

In delivering the report Tuesday, Inspector General Michael Horowitz acknowledged the potential for abuse.

“The risks associated with undercover money laundering are significant and therefore compliance with department policies and statutory requirements are critical,” Horowitz said.

The report also raises questions about how the income generated for the DEA from the undercover operations — nearly $8.5 million during the audit period — is handled. Almost all of those proceeds were used by the DEA to offset investigation expenses, but the auditors described "numerous instances" where the DEA violated reporting requirements. Multiple proposals seeking authorization for the operations contained almost identical, vague language lacking specific targets and time frames, making it difficult to assess results.

While Irizarry is not mentioned in the report, his alleged crimes give greater urgency to the enhanced scrutiny of the operations.

The veteran agent and his wife were arrested in February at their home in Puerto Rico under a 19-count federal indictment that accused Irizarry of “secretly using his position and his special access to information” to divert millions in drug proceeds from the DEA's control.

When The AP revealed the scale of Irizarry’s alleged wrongdoing last year, it sent shockwaves through the DEA, where his ostentatious habits and tales of raucous yacht parties with bikini-clad prostitutes were legendary among agents.

Irizarry was hired by the DEA in Miami despite indications he showed signs of deception in a polygraph exam and had declared bankruptcy with debts of almost $500,000. Still, he was granted special permission to set up undercover operations to send money and ship contraband merchandise to Colombia on behalf of suspected drug traffickers using front companies, shell bank accounts and couriers.

In total, Irizarry and informants under his direction handled at least $3.8 million that should have been carefully tracked by the DEA as part of undercover money laundering investigations

Proceeds allegedly funded the purchase of a $30,000 Tiffany diamond ring, a BMW, three Land Rovers and a $767,000 home in Cartagena, Colombia. Irizarry allegedly opened a bank account in someone else’s name and used the victim’s forged signature and Social Security number.

Derek Maltz, a former agent who headed the DEA’s special operations division, said that while oversight can always be improved, the special operations are key to infiltrating transnational criminal networks. He cited the program's use in Operation Titan, in which the DEA exposed ties between Hezbollah and major drug cartels in Venezuela, Colombia and Mexico.

“I would hate to see the intense scrutiny curtail DEA's progress in destroying the dangerous transnational crime networks,” Maltz said. “Administrative mistakes shouldn’t overshadow the amazing work done for many years utilizing this exceptional investigative technique.”

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Mustian reported from New York.

Follow Goodman on Twitter: @APJoshGoodman

Follow Mustian on Twitter: @JimMustian

News from © The Associated Press, 2020
The Associated Press

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