THE STUDY WAS UNDERTAKEN IN ORDER TO ESTABLISH A FACTUAL RECORD OF MEXICAN HEROIN TRAFFICKING, 'LAUNDERING' OF PROCEEDS, AND THE GOVERNMENT'S EFFORTS TO PREVENT THESE TRANSACTIONS. IT WAS REVEALED THAT CHICAGO HAD BECOME A MAJOR DISTRIBUTION CENTER FOR MEXICAN HEROIN, PRIMARILY TO EAST COAST CENTERS, AND THAT SEVERAL MEXICAN-AMERICAN FAMILIES CONTROL HEROIN SUPPLY. THE LARGEST OF THESE FAMILIES IS THE 1,000 MEMBER HERRERA FAMILY, WHOSE MEMBERS ARE PRIMARILY LOCATED IN DURANGO, MEXICO, AND CHICAGO, ILL. THE COMMITTEE CONDUCTED MANY INTERVIEWS AND INVESTIGATED ALL ASPECTS OF THE CHICAGO HEROIN PROBLEM INCLUDING DRUG TRAFFICKING PATTERNS, AND THE 'LAUNDERING' OF NARCOTICS PROCEEDS THROUGH CURRENCY EXCHANGES AND OTHER FINANCIAL INSTITUTIONS. IT WAS FOUND THAT SEVERAL CURRENCY EXCHANGES HAD ISSUED MONEY ORDERS FOR LARGE AMOUNTS THAT WERE ULTIMATELY DEPOSITED IN MEXICAN BANKS TO HIGHLY SUSPECT ACCOUNTS. THEY WERE FREQUENTLY DEPOSITED AT A BANK LOCATED IN THE STATE OF DURANGO, THE HOME BASE OF THE HERRERA FAMILY WHICH CONTROLS 95 PERCENT OF THE HEROIN TRANSPORTED FROM MEXICO TO CHICAGO. EVIDENCE WAS ALSO OBTAINED THAT TRAFFICKERS WERE USING OTHER FINANCIAL AVENUES SUCH AS TELEGRAPHS, MONEY ORDERS, AND CASHIER'S CHECKS. THE HEARING RECORD WILL BE USED AS A BASE TO DETERMINE HOW GOVERNMENT LAW ENFORCEMENT AND REGULATORY AGENCIES CAN PREVENT THESE TRANSACTIONS FROM CONTINUING. THE REPORT CONTAINS EXTENSIVE TABULAR DATA. (MJW)