U.S. Sanctions International Drug Trafficking

U.S. Sanctions International Drug Trafficking

Ariez Bueno

Associate Editor

Loyola University Chicago School of Law, JD 2025

On October 03, 2023, the Biden administration announced indictments and sanctions against 28 individuals and entities, including China-based companies and their employees related to the trafficking of chemicals needed for the manufacturing of fentanyl. The sanctions aim to interrupt the global supply chain of fentanyl as the administration have increased their efforts on tackling the opioid epidemic. However, rising tensions in the U.S.-China relationship have delayed progress. On September 15, 2023, President Biden added China to the list of the world’s major illicit drug producing and drug transit countries. In response, China’s Ministry of Foreign Affairs stated that the designation is a malicious smear against China. The Ministry further urged the U.S. to do things in ways that are conducive to cooperation with China, not otherwise. With growing international tensions and an epidemic still afoot, the U.S. faces a challenging uphill battle with fentanyl.

Global supply chain

It’s important to highlight other countries that play a role in fentanyl trafficking to illustrate the global supply chain. For example, last week the Biden administration also issued sanctions on ten individuals through President Biden’s Executive Order on Imposing Sanctions on Persons Involved in the Global Illicit Drug Trade. The sanctioned individuals included nine Sinaloa Cartel members from Mexico who actively participated in fentanyl distribution. The Sinaloa Cartel and Jalisco Cartel in Mexico, using chemicals largely sourced from China, are primarily responsible for most of the fentanyl trafficked in the U.S., but India also plays a role in this illicit trade.

India is second largest suppling source of chemicals needed for the manufacturing of fentanyl. India’s vast pharmaceutical industry is weakly regulated when compared to China and the U.S., with fentanyl not being a scheduled drug.

With China, Mexico, and India playing a pivotal role in fentanyl drug trade, the U.S. launched a Global Coalition to Address Synthetic Drug Threats in July. The coalition welcomes countries in combating the production and trafficking of illicit synthetic drugs, like fentanyl. Current members of the coalition include India and Mexico, but not China as of October 05, 2023.

Drug regulation

Fentanyl is currently the deadliest illegal drug in the United States with more than 74,000 reported deaths in 2022. Fentanyl’s fatality is increased when mixed with drugs like xylazine. Xylazine is a powerful sedative that the U.S. Food and Drug Administration has approved for veterinary use. The U.S. Drug Enforcement Administration (DEA) noted an increase in the trafficking of fentanyl mixed with xylazine in recent years. Xylazine is not regulated under the Controlled Substances Act (CSA) and cannot be managed by the DEA. Current Xylazine regulation is limited to the Federal Food, Drug, and Cosmetic Act and some state laws.

Immediate xylazine regulation is vital. The sedative poses an added danger to Americans as xylazine is not an opioid and therefore is impervious to potentially life-saving opioid overdose reversal drugs like naloxone. If regulated by the CSA, penalties for illicit manufacturing, possession, and trafficking could range from fines to life in prison, or (if they kill someone) possibly the death penalty.

Cryptocurrency is the new cash

International fentanyl trafficking has begun to embrace the usage of cryptocurrency in trading. The use of decentralized digital banking has allowed traffickers to transfer vast sums of money instantaneously and has eliminated the need for in-person cash transactions. China crypto-based fentanyl sales alone have shown an influx of $37.8 million worth of cryptocurrency since 2018.

The U.S. Treasury has previously sanctioned cryptocurrency networks through its Office of Foreign Assets Control(OFAC). The OFAC is responsible for administering and enforcing sanctions based on U.S. foreign policy against foreign entities, like international narcotics traffickers. On October 03, 2023, the OFAC added 17 crypto wallets, primarily from China, to a specially designated nationals (SDN) list tied to illegal fentanyl trade. Networks involved with the crypto wallets included Bitcoin, Ethereum, and Tron. The OFAC received just under $3.8 million worth of cryptocurrency through these networks. Previously, Bitcoin and Ethereum have been sanctioned, but this is the first time Tron-related addresses are being targeted.

The use of cryptocurrency with individuals and businesses associated with illegal conduct demands the need for sanctions and other preventative measures. Proposed legislation like the Digital Asset Anti-Money Laundering Act of 2022 could target loopholes in legislation and bring the digital asset ecosystem into greater compliance with anti-money laundering. However, the Act previously lacked support and stalled in the Senate. Without concrete regulation, crypto crimes aiding in fentanyl distribution will be free to devastate Americans.

Fentanyl Standoff

As fentanyl deaths continue to rise, the time to act is now. Over 200 Biden administration sanctions related to illicit drug trade have been issued, but fentanyl continues to pose a fatal threat to American lives. However, with international relationships on the line the important question remains: What more can the U.S. do?