11:30 A.M. EDT
THE WASHINGTON FOREIGN PRESS CENTER, WASHINGTON, D.C.
MODERATOR: Good morning, everyone. Welcome to the Washington Foreign Press Center, and welcome to our colleagues joining us from the Foreign Press Center in New York. Today, we are going to have a briefing on illicit finance in the Middle East. We have two briefers today. Joining us from the Department of Treasury is Under Secretary for Terrorism and Financial Intelligence David Cohen. We also have, from the Drug Enforcement Administration, Special Agent in Charge of the Special Operations Division, Derek Maltz.
Under Secretary Cohen.
UNDER SECRETARY COHEN: So good morning. Thank you for joining us today. So today, acting under Section 311 of the USA Patriot Act, the Treasury Department has identified Kassem Rmeiti and Company for Exchange and Halawi Exchange Company, both operating principally in Lebanon, as financial institutions of primary money-laundering concern. We have taken this action because Rmeiti Exchange and Halawi Exchange use their money-exchange businesses to move millions of dollars annually on behalf of narcotics traffickers and money launderers, and for the benefit of Hezbollah. This money moves internationally, and a good portion of it comes to banks here in the United States.
We have taken this action today to protect the U.S. financial system from the illicit proceeds flowing through Rmeiti Exchange and Halawi Exchange, to disrupt their activities, and to deprive the international narcotics traffickers of key access points into the financial system.
Today’s action is part of a broad, longstanding U.S. Government campaign against the Hezbollah-linked Ayman Joumaa narcotrics and money-laundering network. We first designated this network for sanctions in January 2011 for laundering hundreds of millions of dollars in drug proceeds throughout the Americas, Europe, and the Middle East. In February 2011, we continued to apply pressure on the Joumaa narco-money-laundering network by going after its preferred access point into the formal financial system, the Lebanese Canadian Bank, which we identified as a primary money-laundering concern under Section 311.
As today’s findings lay out, both Rmeiti Exchange and Halawi Exchange increased their business with drug kingpins and money launderers over the last few years to fill the void left when the operations of LCB and two other exchange houses in Joumaa’s network were disrupted by our actions in 2011.
Today’s action also exposes important links between both Rmeiti Exchange and Halawi Exchange and the terrorist organization Hezbollah. Hezbollah has long sought access to the international financial system in order to move its terrorist funds and to launder the profits from its involvement in illegal activity. Make no mistake, Hezbollah is both a full-fledged terrorist organization, lavishly funded over the years by Iran, and an enterprise that increasingly turns to crime to finance itself as the economic pressure on Iran mounts and Iran’s financial situation becomes more tenuous.
Section 311 of the Patriot Act was designed to protect the U.S. financial system from precisely this type of illicit activity – the abuse of financial institutions by drug traffickers, money launderers, and terrorist groups like Hezbollah that affects the U.S. Now, this is the first time that we have used Section 311 to target an exchange house – a non-bank financial institution. These institutions provide vital services in many countries, including Lebanon. But we have also seen that money exchanges have been exploited by money launderers, on occasion due to the complicity by those operating the exchanges, and in part due to weak regulatory supervision.
Section 311 is a flexible tool and can be deployed to disrupt our adversaries regardless of the type of financial institution they seek to use. In conjunction with today’s findings, Treasury is also issuing a notice of proposed rule-making and an order. The notice proposes to forbid any U.S. financial institution from maintaining a correspondent account for either Rmeiti Exchange or Halawi Exchange, or for any foreign financial institution that uses its U.S. correspondent account to process transactions for either exchange. If adopted, this rule would effectively cut off Rmeiti Exchange and the Halawi Exchange from the U.S.
The order, which is immediately effective and stays in effect for 120 days, requires U.S. financial institutions to collect and report certain additional information regarding transactions with Rmeiti Exchange and Halawi Exchange. This information will provide FinCEN and law enforcement greater insight into transactions by the exchanges, which, in turn, will help us to continue following the money trail exposed by today’s action.
Finally, a word about Lebanon’s financial sector. The Lebanese financial sector is an integral part of the Lebanese economy, and today’s actions are not an indictment of the Lebanese financial sector as a whole, but rather expose those actors who abuse it. Treasury maintains an ongoing and active dialog with Lebanese authorities and with the Lebanese banking sector itself to underscore the importance of vigilance with respect to narco money laundering and other illicit financial activity. We are working closely with the Lebanese regulators and private financial institutions to help address the concerns highlighted by today’s action.
Above all, Treasury is acting today to protect the U.S. financial system from exposure to illicit activity. We will continue to work with our partners across the federal government and around the world to target any individual or institution that attempts to run illicit transactions through the U.S. Treasury action’s today would not have been possible without the support from our law enforcement partners at the Drug Enforcement Agency, the Customs and Border Protection, the Federal Bureau of Investigation, and the New Jersey State Police. I wanted to express our sincere appreciation for the close cooperation that we’ve received from these agencies.
With that, I will turn this over to Special Agent in Charge Derek Maltz.
MR. MALTZ: Good morning. Thank you all for being here today for this important announcement, and to the Foreign Press Center for hosting this news conference. This is a terrific venue, and we appreciate all of your fine work.
I’d like to thank Under Secretary Cohen and all the outstanding work by the U.S. Treasury Department in continuing to expose the many criminal elements who serve as facilitators and financiers for some of the world’s most dangerous terror and criminal regimes. DEA’s mission is to disrupt and dismantle criminal organizations that threaten our citizens and promote instability and chaos. In addition to working with our state and local enforcement counterparts, we at DEA are fortunate to have the partners in the Treasury Department to utilize the effective tools such as the 311 designation of the Patriot Act to further our mission and strengthen and protect innocent Americans here and abroad. Nothing is more important than the safety and security of the American people.
Today’s identification of Rmeiti Exchange and Halawi Group as financial institutions of money-laundering concern is part of this broad effort to disrupt and dismantle dangerous organizations as Hezbollah and their financial networks. These two groups use their foreign money transmitter businesses to launder millions in drug proceeds across a wide array of businesses, including some in the United States, making these dollars to appear to be legitimate.
To be clear, DEA investigations have shown that Hezbollah is laundering drug money through these financial institutions. In the view and the opinions of members of the Counter-Narcoterrorism Operation Center, Hezbollah is operating like a major drug cartel, and we’re going to actively investigate them as such with all our law enforcement partners acting as one team. This is another of many clear links between global drug trafficking and terrorism. Drugs and terrorism coexist across the globe in a marriage of mutual convenience. As state-sponsored terrorism has declined, these dangerous organizations have looked far and wide for resources and revenue to recruit, to corrupt, to train, and to strengthen their regime. Many drug-trafficking groups have stepped up to fill that revenue void, and so has these facilitators, like Rmeiti and Halawi.
As I said earlier, DEA’s core principle is to secure our nation and protect our citizens. We do this by having an intelligence-based, threat-driven, and integrated focus. Today’s actions are a perfect example of this vision. Criminals are generating huge amounts of money around the world through drug trafficking, and these proceeds are fueling violence against Americans. We must stay focused on this mission and continue to work with all our partners around the world as these links are more and more evident. Thank you again to Under Secretary Cohen and to the Treasury Department for this action and we look forward to continuing our work together to protect and strengthen this great country.
I’d also like to acknowledge the amazing work of the Department of Homeland Security, Customs and Border Protection. They were an integral part of our team, and along with the FBI and the New Jersey State Police. Thank you.
MODERATOR: We will now accept your questions at this time. If you’re going to ask a question, I would ask that you please state your media affiliation and your name. Gentlemen, if you could please approach the podium.
This gentleman in the vest up front.
QUESTION: Hello. My name’s Oliver Grimm. I’m here for the Austrian newspaper Die Presse. Can you elaborate a bit on the way that this international used car and drug trade funnels money into Hezbollah? And can you also tell us which European countries you have cooperated with and whether you’re – what your outlook is on the European attitudes towards Hezbollah? There is always the constant sort of conflict between the U.S. and the EU whether they should be sanctioned or not, and the Europeans are quite hesitant to do so. Thank you.
UNDER SECRETARY COHEN: Why don’t I start off, and you want to fill in on the – on the drug-money-laundering network, we had on the screen earlier a diagram that essentially described how this network operates. But in short, drugs are produced in South America, moved to West Africa and Europe; proceeds from those drug sales are mixed with the proceeds from the sale of used cars in West Africa. That bulk cash is brought to Lebanon, deposited into the exchange houses, including Halawi Exchange and Rmeiti Exchange. Those funds are then wire transferred either back to the U.S., where they’re used to purchase used cars, which are then sent off to West Africa, or to Asia for the purchase of consumer goods, which are then sent to South America, sold, and proceeds generated there. That’s the essential cycle involved here.
And I should say, it’s essentially the same money-laundering, drug-trafficking scheme as was at issue in the Lebanese Canadian Bank action that we took two years ago. What we are doing today is taking action against two exchange houses that have stepped in to the void created by the action against LCB as well as some exchange houses that we applied sanctions to in January 2011.
I don’t know if you want to add to that.
MR. MALTZ: To answer your question about partnerships, I mean, the DEA and the law enforcement agencies in this operation always work closely with our foreign counterparts throughout Europe and throughout West Africa as well. Several countries in West Africa have provided significant cooperation to the DEA in this matter. We cannot do our jobs globally if we don’t have strong law enforcement partners. So we’re working closely with them. And quite frankly, we, in the DEA, are not interested in a debate on Hezbollah. We’re just interested in protecting the American public and going after these schemes, working with our partners at Treasury.
MODERATOR: The gentleman in the black suit with the – yes.
QUESTION: Yes, Hisham Melhem, Al Arabiya Television. Sir, in your diagram, it seems that the Lebanese banks also are used in these schemes. Could you please elaborate on that? And also, I understand that Lebanese banks are regulated by the Lebanese state, but what about these exchange houses? Are they regulated, or not regulated well, or the Lebanese Government is not doing its job? I mean --
UNDER SECRETARY COHEN: The scheme involves principally the wiring of funds from Lebanese banks to financial institutions in the U.S. and elsewhere. The exchange houses have accounts with Lebanese banks. They use those accounts to place the money in the banks, and then the wire transfers are made from the Lebanese banks.
The focus of our action today, though, is on the exchange houses themselves, not the banks in Lebanon. As I said, we are working very closely with the Lebanese authorities, including the Central Bank of Lebanon. The exchange house sector in Lebanon is regulated. There are 400 or so exchange houses that are licensed by the Central Bank of Lebanon. As we describe in the findings that are issued today, we have concern about the adequacy of the supervision – how well the oversight of the Central Bank is being applied to the money exchange sector.
Now, I should say, the money exchanges in Lebanon as well as elsewhere are a particular, systemic, money-laundering risk. They are institutions that are in the business of accepting cash, and as a result, are often used by illicit actors who generate cash in the course of their illegal conduct. So the supervision of money exchange businesses, what we call here in the United States money services businesses, is very important. It requires careful focus by the regulators, because there is a heightened risk that those sorts of institutions can be used by money launders.
MODERATOR: We can take the next question. This gentleman in the green tie with the glasses.
QUESTION: Thank you. Tolga Tanis, Hurriyet. Quick question regarding this traffic, I mean drug sale traffic in Europe. Is there any other illegal organization that cooperating in Europe, Hezbollah or other organizations to sell drug or for the transfer any money? Because you did – two years ago, you had implemented Kingpin Act for the (inaudible) leaders of PKK for example. Is there any similar organization that they are cooperating in Europe?
And the second question, can you give a few details about the operations of some illegal groups or the radical groups in – based in Syria, in the region, in Lebanon, in Iraq, or in other countries like Turkey? I mean, is there anything to – any detail that you can share with us about especially al-Nusrah, which has been designated as a terrorist organization by the State Department a couple of months ago?
MR. MALTZ: I’m not sure I really understand the question. However, I will say that, in general terms, the Colombian drug trafficking entrepreneurs are taking complete advantage of the market for cocaine in Europe, the Middle East, and other parts of the world. So from a business standpoint, if you can make more money and you can have less risk of going to a U.S. jail based on extraditions from foreign countries – it’s just a very interesting scheme for the Colombian traffickers, because they are now selling their cocaine all over the world and there’s a market where it’s a far more lucrative market than in the United States.
So a lot of these different groups operating all around Africa are now taking advantage of moving the cocaine throughout Africa, West Africa through Northern Africa into Europe, and then the drugs are being distributed throughout Europe and other parts of the world. And then money is being picked up in Europe by different groups and transported back into West Africa. And so there are many different groups. DEA is estimating approximately 50 percent of the foreign terrorist organizations have a connection to drug trafficking, and that’s a low estimate. Because at the end of the day, terrorists are increasingly turning to crime and criminal networks for funding because the U.S. Government and our partners have done a great job at shutting down the streams of funding over the past 10 years, since 9/11.
So obviously they need a lot of money to operate. They have access to a lot of money if they get involved in the drug business, because drugs are generating probably $400 billion a year, according to the UN estimates, around the world. So it’s just basic common sense that if they can generate and make a lot of money from the drug business, criminals are going to do exactly that.
UNDER SECRETARY COHEN: And let me just elaborate for a second on Hezbollah and their activities. It’s worth taking a moment to just be clear about what Hezbollah is and what Hezbollah is involved in. As we say in the findings issued today, Hezbollah benefits from this money-laundering network, this drug trafficking network. It derives financial benefit from this narco-trafficking and money-laundering scheme.
With that funding, as well as the funding that they receive from Iran and elsewhere, Hezbollah is involved in terrorist activity around the world. We saw Hezbollah activity over the summer in Bulgaria in the attack in Burgas. We see Hezbollah in Syria today, working with the Iranians in a – essentially a joint venture, the Jaysh al-Shabi militia that has grown up in Syria, working hand in hand with the Iranians on behalf of the Assad regime, as the violence and the brutality that the regime there is inflicting on its people continues.
Hezbollah is a very dangerous terrorist organization that, as Special Agent Maltz indicated, is turning more and more to criminal activity to fund itself as its historic sources of revenue have become more tenuous. So part of what we’re doing today is shining a light on Hezbollah’s activities, shining a light on how Hezbollah gets funded, as well as taking action to protect the U.S. financial system from this flow of illicit proceeds.
MODERATOR: We’re going to take – we have so many questions, we’re going to have to keep moving though.
QUESTION: (Off mike.)
UNDER SECRETARY COHEN: So I’m not exactly sure what your question is on al-Nusrah. You’re right; the U.S. Government State Department designated al-Nusrah as a terrorist organization in December of last year because of its affiliation with al-Qaida in Iraq. We obviously stand by that designation. Al-Nusrah is an al-Qaida affiliated entity.
MODERATOR: We’re going to take one more question from Washington and then we’ll go to New York. This woman in the purple up front.
QUESTION: Thank you. Laura Haim from Canal+ TV, French Television. Did you find some French banks involved in this money laundering in Lebanon? And my second question is, did you find some Islamist group in Europe related to the money laundering other than Hezbollah? And I’m thinking about Islamist groups like Salafisto (ph), al-Qaida related.
UNDER SECRETARY COHEN: So our focus in the action today is on these two exchange houses, no financial institutions in particular, whether in Lebanon or in France. And again, the only terrorist group at issue in the action today is Hezbollah.
MODERATOR: Okay. We’re going to go to FPC New York. Please ask your question.
QUESTION: Thank you. Since today is the first enactment of Section 311 of the Patriot Act, do we expect that in the coming time we’re going to see more cracking down on the exchange bureau model of business, which is all over the Middle East, whether in Egypt, in Lebanon, in Kuwait, Emirates, et cetera?
My second question, why do Hezbollah need to launder money, since its activities are not really legal? They would purchase arms? They would finance operations? They would pay their militias? Why do they need to have legitimate source of money to finance their operations? Thank you.
UNDER SECRETARY COHEN: With respect to the money exchanges, this is our first use of 311 with respect to money exchanges, not our first use of 311. We have taken other action against money exchanges under other authorities. We have designated in January 2011 three exchange houses affiliated with the Joumaa network that we’re involved in his narcotics trafficking.
But your point is a good one. These money exchanges exist all around the world. We have them, obviously, here in the United States. They are also in many countries in the Middle East and elsewhere. As I said earlier, these businesses are in the business of taking in bulk cash, converting one currency to another, transmitting funds. That is a money laundering risk. We are going to continue to focus on that, both domestically and internationally, as we take steps to combat money laundering and illicit financial activity overall.
I’m now forgetting what the second question was.
MODERATOR: Can you repeat the second part?
QUESTION: Why do Hezbollah needs to launder money, since its operations are not really legal?
UNDER SECRETARY COHEN: Hezbollah, like any other criminal enterprise, wants to convert cash into usable funds that can be transferred through the formal financial system. So by placing cash into the exchange houses, that cash then gets converted into essentially electronic funds that can then be moved around the world and appear to be legitimate, but also can be more readily used to purchase what it is they want to purchase, spend it how they want to spend it.
MODERATOR: Okay. We’re going to go back to Washington for a question. If I can get this woman in the turquoise blue in the middle, and then we’ll come up front after that.
QUESTION: Thank you. Leila Benradja from the Algerian news agency, APS.
So my first question, how do you see the position of Algeria, which is against the – to payment the ransom to the terrorists in the Sahel region? Second question, is there a cooperation between Algeria and the United States about this issue? My last question, do you confirm that France pay the ransom to terrorists in the Sahel region especially? Thank you.
UNDER SECRETARY COHEN: So the question has to do with what we call the kidnapping for ransom issue and concern that we have that terrorist organizations, in particular al-Qaida in the Islamic Maghreb, AQIM, is funded principally through the payment of ransoms. We have, as a matter of U.S. policy, a firm prohibition on the U.S. Government paying ransoms to any terrorist organization, making any sort of concession. The judgment of the United States is that our citizens are better protected in the long run by making clear to terrorists that they can’t get funded by taking hostages, seeking ransoms.
We have worked with countries across Europe, across North Africa, really around the world, to address this issue, because it is a increasing mechanism by which terrorist organizations are funding themselves, AQIM as well as AQAP in Yemen.
Algeria as a government takes the same approach; they will not pay ransoms to terrorist holding hostages. As I said, that is consistent with U.S. policy and something that we support. And with respect to the French, we’ve been in an active consultation with the French Government on this issue as well, and I think I’ll just leave it at that.
MODERATOR: This gentleman in the front. Thank you.
QUESTION: Hi. Jay Soloman with the Wall Street Journal. Kind of two questions. One, you described the close nexus between Hezbollah, Iran, and Syria. Is it – is there any indications that Iran and Syria are financially somehow benefitting from this narco-trafficking as well? Or is it more of a sign that they’re not giving as much money to Hezbollah as they used to, so they’re therefore turning to other forms of revenue?
And second, you said this case basically– these two exchange houses is tied to the LCB case. Is the LCB case now closed, or are you still sort of looking to where other elements of the money they had in that bank might have moved elsewhere or kind of metastasized inside the Lebanese system? Thank you.
UNDER SECRETARY COHEN: So to take the second part first, the LCB case continues. It’s ongoing. We’re continuing to work with the Lebanese authorities with respect to the aftermath of LCB and where the account holders and the funds at LCB have migrated. And I know there’s also some associated actions here in the U.S. and in the Southern District and in the Eastern District of Virginia with – about the civil forfeiture action as well as a criminal case related to the LCB action. And those are still ongoing.
With respect to the Iran-Syria-Hezbollah connection, the focus here is that Hezbollah benefits financially from this narcotics-trafficking network, and the money-laundering networks that we’ve described today. That’s the key to this. And as you note, one of the reasons that we see Hezbollah turning to this sort of financing is because of the greater difficulty Iran is having these days in providing financial support as part of its state sponsorship of terrorism.
I don’t have anything to add with respect to whether Syria or Iran may be benefiting from the activity that’s at issue in today’s actions.
MR. MALTZ: I’d just like to add one point on the question about LCB. And two years ago, thanks to our partners at Treasury, we were able to announce the 311 action against LCB. And after that action, investigatively we’ve developed a lot of leads. And in addition to that, because the banks in Lebanon probably believed the U.S. Government was not capable of getting to their money, we had a subsequent action with the U.S. Attorney’s Office in the Southern District of New York in August of this past summer. We received $150 million from another bank in Lebanon because we identified the movement from LCB through a couple of different banks. So in regards to your question, we are not going to stop pursuing this network, this scheme, until we feel confident that we put them out of business. And we have a long way to go.
MODERATOR: We’re going to go to the Foreign Press Center in New York, and then after that we’re going to take the young lady in the back in the red sweater. Foreign Press Center in New York, can you ask your question please?
QUESTION: Good morning gentlemen. Alexey Osipov (inaudible). My question is to Mr. Maltz. Mr. Maltz, after announcement of today briefing, I got a lot of responds and comments from my colleagues from different countries. And most of them tell me, “Listen, Alexey, you have the ‘wow’ opportunity to see and to ask some question a special agent, so kind of American – kind of American Bond, James Bond.”
And Mr. Maltz, could you give some details, some words about the most interesting, dangerous operation during your career in the Drug Enforcement Administration that you operated, maybe participated, maybe, in the Middle East?
MR. MALTZ: Today, we’re not going to talk about my career. We’re going to talk about the outstanding law enforcement work that’s being done with our partners in Treasury and around the world to go after terror networks, drug trafficking groups. I’m sorry I can’t expand more on my personal career.
MODERATOR: Okay. Right there in the back. Thank you very much.
QUESTION: Thanks for taking my question. This is Anna Yulkananov from Reuters. Just a simple question: First, how much money is Hezbollah actually getting from these networks, if you could give an estimate of that? And then it seems you talk about these exchange houses stepping in to fill the void from the Lebanese Canadian Bank. Do you see a worry that smaller and smaller – or financial organizations are going to step in once you’re kind of – the banks that actually care about having corresponding relationships with the United States are getting sanctioned, and does that make it more difficult to prosecute?
And related to that, you don’t go after the used car dealerships in the United States, and I was just wondering why that is. Thank you very much.
MR. MALTZ: Well, it is an active investigation. As you can imagine, an investigation this global is very complex. So collectively, with all the agencies, we are piecing together the puzzle. It is a complex puzzle. We have made significant strides already. In the U.S. Attorney’s action, we did a civil action of $480 million against Lebanese Canadian Bank and 30 businesses in the United States. We’ve addressed some of the issues with these businesses, but as you can imagine, this is a very complex organization, and we are pursuing that to the best of our abilities and working with everybody that we can work with on this.
MODERATOR: We only have time for one more question. The woman who is in the center, in the gray blazer, with the white blouse on, who’s been patiently waiting for her turn?
QUESTION: Yes Hi. Joyce Karam with Al Hayat newspaper. I wanted to ask you: How would you like the Lebanese Government to respond to this? And I know you said this does not target – it’s not a condemnation of the financial system Lebanese, but these institutions are in Lebanon. So what’s your broader message on that?
UNDER SECRETARY COHEN: The way that we would like the Lebanese regulators to respond and the broader message is the same, which is that the Lebanese regulators have the ability to exercise oversight over these institutions, over the money exchange sector as a whole in Lebanon. We think it is essential for the Lebanese regulators as well as regulators in other countries to recognize the risk posed by money exchange businesses, and to apply the appropriate level of supervision and scrutiny to make sure that those – that that set of financial institutions are operated in a safe, secure, and sound manner.
With respect to these two exchanges, I think our hope is that the Lebanese regulators will look at the action we’ve taken today, take it onboard, and consider what the appropriate action may be under their own authorities, leave that for the Lebanese authorities to decide. But the – for broader message here is – and it gets, I think, to the prior question as well – is that we do see a migration from formal financial institutions, banks in particular, to money exchangers and other types of business that are, in some sense, one step removed from the banks. That’s not unexpected, but it’s also not something that is beyond the capacity of regulators to address and law enforcement to address. And so we will continue to pursue how the money launderers and narco-traffickers operate and do what we can to disrupt their activities.
MODERATOR: We actually do have a few seconds left, so FPC New York, did you have a short question that you want to ask?
QUESTION: Yes. George Szpiro, Neue Zurcher Zeitung from Switzerland. Could you give us some numbers on how much money was laundered in the past six month or 12 month, how much of that went to Hezbollah? And are there any other clients of these two exchange houses?
UNDER SECRETARY COHEN: I think the volume of funds being laundered is in the tens of millions of dollars, and specifically, the amount that Hezbollah has benefited from that, we can’t be precise on that, but overall, this network is laundering in the tens of millions of dollars.
MR. MALTZ: Just to follow up, also, in the indictment out of the Eastern District of Virginia, Ayman Joumaa, who was designated as a drug kingpin in this particular scheme, was responsible for the movement of 85,000 kilos of Zeta’s cocaine. So you can only imagine the amounts of money we’re talking about moving through this network.
MODERATOR: Thank you, gentlemen, for joining us. Thank you all for attending. This concludes our briefing. If you file, please kindly send a copy of your reports to us so that we can keep track. Thank you.
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