Treasury's War Page 46

  Ultimately, I need to thank President Bush. His leadership and vision in this period allowed this new era of financial warfare to unfold. The president afforded me the opportunity to serve him, his administration, and the country at a critical time in its history. I will always be grateful for his trust and confidence in me when I arrived at the White House in 2005, and throughout his tenure, until the end of his administration in 2009. It remains a point of pride for me that the Cuban government once called me “Bush’s mercenary.” History will show that this label was and remains a badge of honor.

  Many other people and organizations provided invaluable assistance in the crafting of this book.

  I would like to thank my research assistants, Zack Cooper and Matthew Irvine, for their help in shaping and developing this book over the arduous course of many months. Their judgments, insights, and research allowed me to draft this text. These are superb young men who are important thinkers in their own right and will become future policy leaders. I am grateful to have worked with them.

  Others who contributed directly to the ideas and research contained in the book include David Gordon, Zack Fellman, and Jonathan Greenstein, who served as critical sounding boards throughout the process. Elizabeth Dennison and Michael Gallagher helped me to craft Chapter 16 and inspired some of my thinking about the future implications of financial warfare. Muhammad Kirdar influenced my thinking about many issues, especially the strategic implications of financial suasion, which is reflected in the Epilogue. I also thank Todd Hinnen and Chip Poncy for their help in honing the book in its final stages and for their constant and critical friendship. I am grateful to Christine Delargy for her help in compiling the photographs for the book.

  To write this book I conducted dozens of interviews—many more than I anticipated. Although I interviewed too many people to mention individually, each provided me with insights and stories that added to the richness of this history. To those who were willing to spend time being interviewed and queried—from bankers and academics to former and current US officials—I offer you my thanks.

  The book also received financial and material support from the start. I want to thank the Smith Richardson Foundation—and, in particular, Nadia Schadlow—for their enthusiastic support and faith in this project and in me. I am also indebted to the Stavros Niarchos Foundation, which contributed to the elements of the book that look to the future of financial warfare. I am grateful for their financial support and patience.

  My colleagues at the Center for Strategic and International Studies (CSIS) have supported me from the time I left government. Because of the leadership and scholarship of Dr. John Hamre, and legends like Arnaud de Borchgrave, CSIS remains one of the preeminent think tanks in the world. I benefit and learn from my CSIS colleagues every day. I would like to thank Tom Sanderson, Ozzie Nelson, Andrew Schwartz, Jon Alterman, Jim Lewis, Craig Cohen, Reuben Jeffrey, John Heyl, Fariborz Ghadar, John MacGaffin, Dick O’Neill, and Jonathan Winer, in particular for their support to me in all phases of my research and writing—on this and other projects.

  To John Brockman and Max Brockman, my literary agents, thank you for your faith and confidence in me and this story from the moment we spoke and met in your New York office. Your confidence and aggressive encouragement convinced me that I had to write this book and gave me faith that I could actually do it. Your diligence also allowed us to find Clive Priddle and a home for the book at PublicAffairs.

  I could not have written and published a credible book without Clive Priddle and the professionals at PublicAffairs. Clive and Brandon Proia took a scalpel to my original manuscript and prodded and pushed me to make this a more readable, accurate, and interesting text. Melissa Raymond, the managing editor, and Robert Kimzey, my production editor, calmly helped me to navigate the production and editing process, while Katherine Streckfus, my copy editor, helped get the book into solid shape for publication. The marketing team has helped to ensure that this story gets the attention it deserves. I also would like to thank Pete Garceau for the wonderful, evocative cover. If the book is entertaining and educational, it is largely due to the work of the professionals at PublicAffairs. Any mistakes or material omissions are solely my responsibility.

  Finally, I must thank my family for their lifelong support and confidence in me. My father and mother came to this country believing in the American dream, and they lived that dream. In so doing, they gave me and my siblings the gift of faith in an America that is the promised land of opportunity for all who are willing to take the risk and work for it—regardless of race, color, or creed. They also imparted to us a solid belief in an America that is a force for good in the world. Without America, the world would be a much darker and deadlier place.

  My brothers, sister, nana, and extended family have always been a bastion of support, and I thank them for all they have given me. Most importantly, I want to thank my wife, Cindy, and my children, who endured the many months of this joyful slog and supported me when I needed to write or travel for research. This book was not written during a sabbatical or in a halcyon hideaway. It was written amid everyday family life, which put enormous pressure on my wife, who has a full-time career of her own. As always, Cindy endured with great energy and was unwavering in her faith that this book would be written—for which I am eternally grateful. I love them very much and thank them for everything they have given me.

  I have been blessed—both with opportunities to serve at a unique time in our country’s history and with family, friends, and colleagues who have always had faith in me. It is fair to say that without all of the people I’ve mentioned and others left unmentioned, this book would not have been written and published. Thank you to all. I hope the reader finds the book worthy of the time and effort put into it.

  NOTES

  Prologue: “The Hidden War”

  1.“Ahmadinejad: Hidden War on Global Scale Waged Against Iran’s Oil Sector,” Iran Daily Brief, October 8, 2012, www.irandailybrief.com/2012/10/08/ahmadinejad-hidden-war-on-global-scale-waged-against-irans-oil-sector/.

  2.Ayman al-Zawahiri to Abu Mus’ab al-Zarqawi, July 9, 2005, Federation of American Scientists, Intelligence Resource Program, www.fas.org/irp/news/2005/10/letter_in_english.pdf.

  3.“Friday News Roundup,” The Diane Rehm Show, National Public Radio, October 5, 2012, http://thedianerehmshow.org/audio-player?nid=16725.

  Introduction: The Modern Megarian Decree

  1.“Criminal Investigations,” n.d., United States Secret Service, www.secretservice.gov/criminal.shtml.

  2.President Lincoln signed the order to create the Secret Service on April 14, 1865, the same day he was assassinated.

  3.Paul D. Taylor, “Economic Coercion in the Service of National Security,” June 16, 1998, Current Strategy Forum, www.au.af.mil/au/awc/awcgate/navy/economic_coercion.htm.

  4.The best work on this subject is Diane B. Kunz, The Economic Diplomacy of the Suez Crisis (Chapel Hill: University of North Carolina Press, 1991).

  5.Also see Rose McDermott, Risk-Taking in International Politics (Ann Arbor: University of Michigan Press, 1998), Chapter 6, “The 1956 Suez Crisis,” online at www.press.umich.edu/pdf/0472108670–06.pdf.

  6.Office of Foreign Assets Control (OFAC), Cuba: What You Need to Know About U.S. Sanctions Against Cuba, updated January 24, 2012, www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba.pdf.

  Chapter 1: A New Kind of War

  1.Administration of President George W. Bush, Highlights of Accomplishments and Results, December 2008, http://georgewbush-whitehouse.archives.gov/infocus/bushrecord/documents/legacybooklet.pdf, 6.

  2.“Appendix A: The Financing of the 9/11 Plot,” in National Commission on Terrorist Attacks upon the United States, The 9/11 Commission Report (Washington, DC: US Government Printing Office, 2004), http://govinfo.library.unt.edu/911/report/index.htm, 132.

  3.Ibid., 140.

  4.Jimmy Gurulé, Unfunding Terror: The Legal Response to the Financing of Global Terrorism
(Northampton, UK: Edward Elgar Publishing, 2008), 202. Under US criminal law, Title 18 USC 1956, money laundering can also be defined as the use of funds with criminal intent, regardless of the source. Thus, the use of the term “reverse money laundering” to describe terrorist financing is technically inaccurate, since the definition of money laundering used by the United States contemplates the use of legitimate funds for illegal purposes.

  5.“Terrorist financing” is not defined as such under US law. Instead, pursuant to Title 18 USC 2339A and 2339B, the provision of material support, which includes financial resources or facilitation, to a terrorist or a designated Foreign Terrorist Organization is a criminal act. For purposes of asset freezing under Executive Order 13224, those who provide any manner of support or facilitation to a designated person, or who are controlled by or are acting for or on behalf of such a person, either directly or indirectly, are subject to the asset-freezing provisions of that order. Under international law, the clearest definition of “terrorist financing” comes from Article 2(1) of the International Convention for the Suppression of the Financing of Terrorism: “Any person commits an offence within the meaning of this Convention if that person by any means, directly or indirectly, unlawfully and willfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out: (a) An act which constitutes an offence within the scope of and as defined in one of the treaties listed in the annex, or (b) Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act.”

  6.“Terrorist financing, therefore, is different than classic money laundering. In cases of money laundering, the proceeds of illicit activity are laundered or layered in ways to make the proceeds appear legitimate, and the ultimate goal is usually the attainment of more money. With terrorist financing, the source of funding or financing is often legitimate—as in the case of charitable donations or profits from store-front businesses—and the ultimate goal is not necessarily the attainment of more funds. The ultimate goal of terrorist financing is destruction. Uncovering the sources and methods of terrorist financing is a complex endeavor. The complexity stems in part from the sophistication of the individuals attempting to hide their activities. It is also difficult to attribute certain types of activities or movement of money directly to terrorism.” “Testimony of Juan C. Zarate, Deputy Assistant Secretary for Terrorism and Violent Crime, U.S. Department of the Treasury, House Financial Subcommittee, Oversight and Investigations,” Washington, DC, February 12, 2002. For a complete copy of the testimony, see www.treas.gov/press/releases/po1009.htm.

  Hawala is an international alternative remittance system consisting of a global network of financial brokers and money houses that establish lines of credit for individuals or organizations and allow for the deposit and withdrawal of funds from any of the network’s brokers. See Patrick Jost and Harjit Singh Sandhu, “The Hawala Alternative Remittance System and Its Role in Money Laundering,” Interpol General Secretariat, January 2000.

  7.US Government, 2002 National Money Laundering Goal 2, July 2002, 15.

  8.The Department of State has named seven states as “Sponsors of Terrorism”: Iran, Iraq, Syria, Cuba, North Korea, Sudan, and Libya. It is well known that Iran and Syria provide direct support to Hezbollah.

  9.Kimberley L. Thachuk, “Terrorism’s Financial Lifeline: Can It Be Severed?” Strategic Forum, Institute for National Strategic Studies, National Defense University, no. 191, May 2002.

  10.US Department of Treasury, “Frequently Asked Questions,” May 2, 2006, www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx#2.

  11.President Jimmy Carter, Executive Order 12170, “Blocking Iranian Government Property,” November 14, 1979.

  12.“Bush: ‘We Will Starve the Terrorists,’” CNN, September 24, 2001, http://edition.cnn.com/2001/US/09/24/ret.bush.transcript/index.html.

  13.Scott Shane, “Behind Bush’s Fury, a Vow Made in 2001,” New York Times, June 29, 2006, www.nytimes.com/2006/06/29/washington/29intel.html.

  14.See Jimmy Gurulé, “The Global Fight Against the Financing of Terror: Prevention—A New Paradigm,” speech delivered to the Heritage Foundation, Washington, DC, June 26, 2002.

  15.United Nations Security Council Resolution 1373, September 28, 2001, Section 1.

  16.US Customs Service, “Press Release: U.S. Customs Service Launches ‘Operation Green Quest,’” October 25, 2001, www.cbp.gov/hot-new/pressrel/2001/1025–03.htm.

  17.Douglas Farah, “The Role of Conflict Diamonds and Failed States in the Terrorist Financial Structure,” October 24, 2003, Watson Institute, www.douglasfarah.com/articles/conflict-diamonds.php.

  18.Naftali Bendavid, “Money War Intensifies: U.S. Raids Two Global Banking Networks,” Chicago Tribune, November 8, 2001.

  19.Paul O’Neill, “Remarks by Treasury Secretary Paul O’Neill on New U.S.–Saudi Arabia Terrorist Financing Designations,” US Treasury Department, March 11, 2002, www.treasury.gov/press-center/press-releases/Pages/po1086.aspx.

  20.See “Treasury Targets al Qaeda Finance Official,” Reuters, August 24, 2010, www.reuters.com/article/2010/08/24/us-usa-qaeda-financing-idUSTRE67N5CP20100824.

  21.Stuart Levey, “Loss of Moneyman a Big Blow to al Qaeda,” Washington Post, June 6, 2010, www.washingtonpost.com/wp-dyn/content/article/2010/06/04/AR2010060404271.html.

  Chapter 2: Financial Footprints

  1.Jean-Louis Bruguiere, “Second Report on the Processing of EU-Originating Personal Data by the United States Treasury Department for Counter Terrorism Purposes: Terrorist Finance Tracking Programme,” January 2010, Statewatch, www.statewatch.org/news/2010/aug/eu-usa-swift-2nd-bruguiere-report.pdf.

  2.Anthony Cordesman and Khalid Al-Rodhan, “Iranian Nuclear Weapons? The Uncertain Nature of Iran’s Nuclear Programs,” Center for Strategic and International Studies, April 12, 2006, 28.

  3.Eric Lichtblau, “Homeland Security Department Experiments with New Tool to Track Financial Crime,” New York Times, December 12, 2004, http://query.nytimes.com/gst/fullpage.html?res=9B04E0D61E31F931A25751C1A9629C8B63.

  4.See Matthew Levitt, “Follow the Money: Leveraging Financial Intelligence to Combat Transnational Threats,” Georgetown Journal of International Affairs, Winter/Spring 2011, http://journal.georgetown.edu/wp-content/uploads/34–43-FORUM-Levitt.pdf, originally in Elizabeth Kelleher, “U.S. Defends Use of Bank Messaging System to Track Terrorists,” The Washington File, Bureau of International Information Programs, US Department of State, June 23, 2006.

  Chapter 3: Nose Under the Tent

  1.“Terrorist Finance: The Iceberg Beneath the Charity,” The Economist, March 13, 2003.

  2.Laurie Goodstein, “U.S. Muslims Taken Aback by Charity’s Conviction,” New York Times, November 26, 2008.

  3.Stephen Ulph, “Jihadists Respond to Earthquake Victims in Pakistan,” October 31, 2005, www.jamestown.org/programs/gta/single/?tx_ttnews%5Btt_news%5D=595&tx_ttnews%5BbackPid%5D=238&no_cache=1.

  4.John Roth, Douglas Greenburg, and Serena White, National Commission on Terrorist Attacks upon the United States: Monograph on Terrorist Financing. Staff Report to the Commission, Chapter 7, “Al Haramain Case Study,” http://govinfo.library.unt.edu/911/staff_statements/911_TerrFin_Monograph.pdf, 119.

  5.US Department of the Treasury, “Treasury Designates Benevolence International Foundation and Related Entities Financiers of Terrorism,” November 19, 2002, www.treasury.gov/press-center/press-releases/Pages/po3632.aspx.

  6.For more on the Golden Chain, see “Written Testimony of Jean-Charles Brisard, International Expert on Terrorism Financing, Before the Committee on Banking, Housing and Urban Affairs, United States Senate,” October 22, 2003, http://banking.sena
te.gov/public/index.cfm?FuseAction=Files.View&File-Store_id=c9b0cf41-cb29–4370–9666–6281e97f5170, 3.

  7.Victor Comras, “It’s Time to Put Yasin al Kadi Out of Business!” Counterterrorism Blog, September 20, 2005, http://counterterrorismblog.org/2005/09/its_time_to_put_yasin_al_kadi.php.

  8.See “Yassin Abdullah Kadi and Al Barakaat International Foundation,” European Court of Justice, September 3, 2008, www.tamilnet.com/img/publish/2008/09/ecj-judgment0904.pdf.

  9.US Department of the Treasury, “Treasury Targets Key al-Qa’ida Funding and Support Network Using Iran as a Critical Transit Point,” July 28, 2011, www.treasury.gov/press-center/press-releases/Pages/tg1261.aspx.

  10.Robert Lenzner and Nathan Vardi, “Terror Inc.,” Forbes, October 18, 2004, www.forbes.com/global/2004/1018/016.html; Christopher M. Blanchard and Alfred B. Prados, “Saudi Arabia: Terrorist Financing Issues,” Congressional Research Service, updated September 14, 2007, www.fas.org/sgp/crs/terror/RL32499.pdf. The edict creating Account 98 was Royal Decree 8636.

  11.Timothy O’Brien, “US Presses Saudis to Police Accounts Used to Aid Palestinians,” New York Times, June 24, 2003, www.nytimes.com/2003/06/24/world/us-presses-saudis-to-police-accounts-used-to-aid-palestinians.html.

  12.Steven Stalinsky, “Saudi Royal Family’s Financial Support to the Palestinians 1998–2003: More Than 15 million Riyals ($2 Billion US) Given to ‘Mujahideen Fighters’ and ‘Families of Martyrs,’” Middle East Media Research Institute, Special Report No. 17, July 3, 2003, www.memri.org/report/en/0/0/0/0/0/0/902.htm.

  13.Ibid.

  14.Lenzner and Vardi, “Terror Inc.”

  15.Ibid.