Treasury's War Page 45
An inherent and dynamic tension has emerged between the isolation of suspect behavior from the formal financial system and the incorporation of more of the world into the formal financial system. Going forward, the core principle of isolating and exiling actors from the legitimate financial system needs to be balanced with the need to ensure that rogue actors can be captured and affected by the legitimate financial system.
New technologies and innovative methods of adapting to or evading sanctions will also bedevil US efforts to apply the classic tools of financial suasion. In particular, those financial rogues with enough influence and resources to do so will continue to buy access to global transactions and develop alternative means of engagement. And some financial institutions will take unwarranted risks, opening the gates of the international financial system to suspect actors, and pay the price.
In this regard, the financial warfare of the past decade needs to evolve to include an explicitly inclusionary policy and strategy. An inclusionary strategy would work toward a number of positive ends, ensuring that underdeveloped regions of the world and regions in conflict were banked by legitimate financial actors; that banking centers in developing areas were included in the relevant anti-money-laundering and anti-corruption financial systems that already exist; that, by expanding the “buddy bank” and private-sector dialogue concept, existing banks would help to foster the transparency and accountability of indigenous institutions; that charitable services and backfill could reach the needy around the world—without interference from the coercion and corruption of terrorist and militant organizations; and that compliant and legitimate banks and actors are rewarded with more business, not less. Exclusion and inclusion into the financial system thus represent two sides of the same coin for the future of financial warfare. The underlying goal would be to define clearly and consistently the lines of legitimacy for financial and commercial conduct in the international system.
Revelations in the Use of Financial Power
The use of this type of financial power—and, in particular, its focus on flows of dirty money—has revealed some fundamental policy issues and paved the way for new ways of thinking about national security.
The use of financial intelligence continues to reveal links and associations between America’s enemies that tend to remain unseen when these enemies are viewed individually through the lens of conventional intelligence. The “follow the money” doctrine and financial network analysis put both emerging threats and enemy vulnerabilities into sharp relief.
Treasury’s designation process—with its public “name and shame” component and mechanics to ensure international financial isolation—has raised difficult and fundamental questions of national security import. As noted in Chapter 3, the question of how to deal with Saudi support to certain suspect Wahhabi causes and organizations, and the historical links of those organizations to the Arab mujahideen, came through the designation process. In addition, new debates emerged and continue to be relevant, including how to treat organizations that raise money for and advocate the use of suicide bombers, such as the Muslim Brotherhood.
Soon after 9/11, a question arose as to whether to designate the charismatic Muslim Brotherhood cleric and fundraiser Sheikh Yusuf al-Qaradawi. Qaradawi was a senior Brotherhood leader and cleric exiled from Egypt by longtime Egyptian strongman Hosni Mubarak. Qaradawi had established himself in Qatar as the leading global voice for Islamist agendas. With his popular show on Al Jazeera and deep Islamic credentials and political sway, he was known by some within the US government as the “Larry King” and the “Billy Graham” of the Arab airwaves. When Egyptian President Mubarak fell from power in 2011, Qaradawi returned to Cairo triumphantly to a reception and rally in front of hundreds of thousands of followers. His return portended the coming of the Muslim Brotherhood to power and rule now seen in Egypt.
This designation debate quickly became a proxy for the broader, more fundamental question of how to view and treat the Brotherhood. Was the Brotherhood a terrorist organization? Were its senior-most leaders hiding a secret agenda and providing financial support to multiple terrorist organizations in opposition to US interests? Could the Brotherhood really be nonviolent and moderate—and negotiated with or co-opted to work with the West against Al Qaeda? These remain serious questions about the nature and ambitions of this movement, especially in the wake of the Arab revolutions. The very same debates about the Brotherhood took place in the immediate wake of 9/11, in the context of Qaradawi’s designation, and we went on to designate other Muslim Brotherhood leaders who were supporting Al Qaeda. Questions about how to treat financial facilitation should continue to emerge. These are difficult policy questions.
The targeting of financial facilitators also provided novel insights for a new type of deterrence. Though it may not be possible to deter a terrorist trigger-puller in the last instant of an attack, others in the network and business cycle—such as bankers and financiers—could be deterred if they recognized that their resources and legitimacy were at risk. Such deterrence—whether produced by public attention or quiet regulatory efforts—could affect the availability of capital and the ability of networks to execute significant plots and expand globally. This insight also allowed us to think differently about how to stop terrorist networks from being able to access or use weapons of mass destruction. By looking at the threat as a business cycle—which originates with the source of nuclear material and proceeds with the smugglers, facilitators, and end users—we can find multiple points at which to influence and interrupt the supply chain. Deterrence then was not just something to be aimed at suicide attackers but instead could be aimed at all of the actors in the cycle, with each category of actors reacting to different types of influence. The focus on financial support to America’s enemies will continue to present new opportunities to influence their activities.
In addition, it is in the context of financial warfare that the United States has experienced its most consistent questions and tradeoffs about the use of cyber-weapons to disrupt the enemy’s financial resources. Concern over the effects of cyber warfare on the financial system, and confidence in the United States as the keeper of the modern capitalist system, has constrained the use of such weapons. With this issue squarely in mind, Treasury Secretary Paulson has often spoken of the need to protect the “magnificent glass house” of the international financial system. Ironically, this is the arena in which the US financial system now faces its greatest vulnerability.
Finally, the financial pressure campaigns revealed the opportunities of financial diplomacy. Countries and the private sector often did not find it difficult to cooperate against terrorist financing or illicit funding flows because it presented a softer and more manageable form of combating transnational threats than other methods. For many countries, freezing bank accounts or seizing cash at borders was a more palatable way of fighting terrorism than sending troops to war zones. Financial diplomacy also revealed new communities of actors—from finance ministries and banks to anti-money-laundering experts and compliance officers—that, if leveraged properly, could affect international security.
From Financial to Strategic Suasion
Perhaps the most important lesson from the use of this type of financial power is what it tells us about leveraging power in the twenty-first century. What made this type of financial warfare different from and more effective than traditional sanctions was that we harnessed the private sector’s own interests and calculus to isolate rogue financial actors. The banking community was not an ancillary part of American power, but a seminal and central part of it. The trick, then, was in aligning the concerns of private-sector actors over reputational risk and their bottom line with American national security imperatives. This is why meetings with bank CEOs and compliance officers often became more important than meetings with government officials. Our key insight was in recognizing that financial institutions could be prompted to lock the gates of the financial system.
In
an increasingly interconnected world—where trade, financing, travel, and communications are fundamentally intertwined—nonstate, networked actors and systems—from corporations to influential Twitterati—often hold the keys to power and influence globally. The lament of the loss of American power and influence, and our inability to conduct “streetcraft” in addition to “statecraft,” especially in the wake of the Arab revolutions, reflects a belief system dependent primarily on the projection of power through classic state institutions.
Power and influence now often lie outside the classic state structures and Westphalian models that have defined the post–World War II era. The state remains relevant, but more than ever before, the global power landscape is shared with other actors and networks. It’s not enough to say that power has shifted—we need to recognize that state-based power may no longer be central to exerting influence in this new environment. White House talking points, US Agency for International Development relief and programs, and the might of the US military may not be enough in this new world.
Like the international financial system, this new global landscape offers not just transnational threats to be countered but advantages and potential new allies as well. The national security focus since 9/11 has largely centered on the threats brought to us by globalization and the shifting nature of power. The shock of 9/11 was not just the horrors of a devastating attack against civilians on American soil, but the fact that it was perpetrated by a small network of dedicated individuals who rejected modernity but were able to leverage key elements of globalization to strike the sole remaining superpower from the hinterlands of Afghanistan.
We have spent much of the past decade concerned with nefarious actors and networks—from Al Qaeda to Russian organized crime—that have drawn strength from globalization and increased access to information and new technologies. But we have consistently failed to look at the other side of the ledger—for allies and the networks of actors and institutions whose interests align with our own.
Just as David Headley, the American recruited by Lashkar-e-Taiba, was able to use Google Maps to help plot the Mumbai attacks in 2008, Oscar Morales, an unemployed Colombian engineer, used Facebook in 2007 to mobilize 11 million people around the world to march against the FARC and give voice to the anti-kidnapping movement. In a society in which information moves at the speed of Twitter, individuals like Julian Assange of WikiLeaks can wantonly disseminate state secrets, straining diplomatic relations and putting lives at risk. Yet, the very interconnectedness upon which he preyed also empowers companies such as Amazon, MasterCard, and PayPal to shut down his funding sources in ways that are swifter and perhaps more effective than government-led legal action.
Similarly, the US government has worried about groups of Somali American youth in Minneapolis, Seattle, and Columbus traveling to Somalia to train and fight (often engaging in suicide attacks) with the Al Qaeda affiliate Al Shabaab. But it has done far less to support the Somali American business elite, including those who have returned to serve in and lead Somalia’s Transitional Federal Government (TFG) to establish a new government and a semblance of stability. Although terrorist groups have forged dangerous alliances and networks through shared training camps, tens of thousands of international military and police personnel train in the United States annually—often studying at American universities. They remain an untapped resource for formal and informal global security coordination and cooperation. And though we kill Al Qaeda core leaders in Pakistan’s western frontier and strain to maintain diplomatic relations with Islamabad, we spend comparably little time supporting the investments of Pakistani American men and women doing business in and along those borders.
In the twenty-first century, the nation that galvanizes the majority of these new global voices will enjoy more power and exert more influence than has ever before been possible. More than any other state and culture, America—enabled and accelerated by globalization and new technologies—still enjoys a comparative advantage in leveraging power and influence in ways that are commensurate with our enduring strategic security heritage and our prosperity. This opportunity stems from the active employment of our unrivaled strategic suasion. Strategic suasion is the directed use of American power and influence to align influential state and nonstate actors and networks with American interests.
The empowerment of private-sector and nonstate actors does not threaten our interests. Indeed, as the rising power centers, credible voices, and key shapers of environments, these actors are our natural allies in the twenty-first century. Our interaction with them, however, can no longer be passive or ad hoc. We need to develop new structures and doctrines that enable our government and these actors to work in concert and in parallel to realize and achieve common goals and interests.
Though classic state power still matters, we must take a new national security model into account. Two themes are central to this new model: the idea of strategic suasion, and the role of nonstate, networked actors, working alongside classic state power, to influence the world for good. National security policy should be geared toward aligning those nonstate interests with American interests and values. The goal of our national security should not be just the defense and promotion of our interests, but the creation of conditions globally that are commensurate with American interests and values. The rule of law, freedom of expression, freedom of the press, the flow of information, respect for human rights, protection of minorities, the empowerment of women, free trade, systems that empower entrepreneurs and individual expression, the accountability of governments, and transparent civil institutions are all goals that the United States and American society should be promoting. These goals are neither solely the province of the US government nor achievable only by the work of government.
This may be the ultimate lesson of the use of financial power in this era. Nonstate actors can be leveraged when their interests align with those of the United States. American power is more than what the government controls; it also encompasses those activities that shape local and geopolitical environments in line with American interests. The US Treasury leveraged the self-interest of the private sector to promote broader values and interests in service of America’s national security. Financial legitimacy and reputation became the coins of the realm. This is not just a new way of viewing financial warfare, but a novel view for the projection and use of power more broadly in the twenty-first century.
ACKNOWLEDGMENTS
This book would not have been possible without the assistance and support of others. I would like to thank all of them for sharing their insights, their support, and their expertise.
I wrote this story to provide a glimpse into the heretofore unseen world of financial warfare, which is being executed every day in both subtle and dramatic ways by dedicated public servants. A small community of actors within the US government and in the private sector has dedicated itself since 9/11 to dismantling the financial underpinnings of America’s enemies in novel and aggressive ways. This was an unusually unified group of colleagues and professionals—who often were close friends of mine. Like a family, we fought internally—often fiercely—but we all had the same goal in mind: the protection of US interests and the decimation of America’s enemies.
Many of these professionals are mentioned in this book; others are not. But they are all a part of the history of this period. Although there are too many people who made contributions for me to thank each individually in these pages, I will always remain grateful for their friendship, support, and service. I am most grateful to the small group of Treasury colleagues who worked with me to resurrect the organization at a time of great challenge—especially Danny Glaser, Chip Poncy, Jeff Ross, Traci Sanders, Anne Wallwork, Paul DerGarabedian, Nan Donnells, Janice Gardner, Charlie Ott, Ryan Wallerstein, Amit Sharma, and Linda Johnson. Whenever I refer to “we” in this story, it is often this group of colleagues and friends from the Treasury Department that I have in mind.
I must always thank Ji
mmy Gurulé and Mark Bonner, who brought me into the Treasury Department to help in their enforcement work before 9/11 and gave me enormous responsibility after the attacks. Others at the Treasury who have afforded me their trust and confidence include secretaries Paul O’Neill and John Snow, deputy secretaries Kenneth Dam and Sam Bodman, Undersecretary John Taylor, general counsels David Aufhauser and Arnie Havens, and Tim Adams, Chris Smith, Bill Fox, Bob Werner, Bill Murden, William Langford, Robert Nichols, Adnan Kifayat, Jody Myers, Larry McDonald, Julie Myers, Michael Russell, Michael Dawson, Tim Skud, Pat O’Brien, Eric Hampl, and Jeff Kupfer. Later, Undersecretary Stuart Levey provided leadership, support, and friendship—on which I rely to this day. It was with great pride that I called myself a “US Treasury official,” and I thank them all for this privilege.
I would also like to thank my colleagues and friends at the Department of Justice, people like George Toscas, Jack Purcell, John Lancaster, and Bruce Swartz, who trained and supported me—and saw me as a promising prosecutor and policymaker.
I must thank Stephen Hadley and Frances Fragos Townsend for the opportunity to work for them and serve them and President George W. Bush at the White House. They afforded me their trust and confidence as we grappled with some of the most difficult issues facing the country in the second term of the Bush administration. They are two of the great national security professionals from whom I have learned much, and I can never repay them for the honor of having served as deputy national security adviser. I thank them for their leadership, dedication, and patience with me. Others at the National Security Council, including Ambassadors Jim Jeffrey and J. D. Crouch, were unfailing in their support and camaraderie, often under the most difficult of circumstances, and always with utter professionalism.