FRIDAY NEWS ROUNDUP — OCTOBER 9, 2020
PRESIDENTIAL SUCCESSION ISN’T CLEAR CUT; THE LESSONS OF BLACK HAWK DOWN; THE UK SHIFTS TO ADRESS “POLITICAL WARFARE”; AND UNCOVERING THE TIP OF THE MONEY LAUNDERING ICEBERG
A good Friday morning to you from Washington, D.C., where the past week has felt like a month’s worth of history. Throughout the week we have been tracking the health of the president, the health of the economy, and the health of our democracy. We continue to hope that the president, the first lady, affected White House staff, diagnosed military commanders, and the 319,622 Americans diagnosed with Covid-19 in the past week alone have rapid and full recoveries.
While the markets have whipsawed with the tumultuous back-and-forth on stimulus negotiations, little has changed over the past weeks to bring either side closer to a deal. Both Fed Chairman Powell and the American people are left wondering when aid will arrive. As early voting has continued across America, voters lining up at polling places, post offices, and dropboxes to make sure their voice is heard.
In an unprecedented joint video statement, the Directors of the FBI, NSA, Cybersecurity and Infrastructure Security Agency, and National Counterintelligence and Security Center laid out what they are doing to combat election interference and reminded the American people about the importance and security of our elections. Yet, from Michigan we see that the flames of hatred and ignorance continue to fuel those who think that armed criminality can usurp the will of the voters. Finally, we keep the people of the Gulf Coast and Louisiana in our thoughts as yet another hurricane bears down on them.
With President Trump’s diagnosis, our CEO Glenn Nye and Dan Mahaffee wrote in The Hill about the challenge that a presidential illness poses to our institutions. In the Diplomatic Courier, Joshua critiqued Tim Weiner’s The Folly and the Glory, as a missed opportunity to explore the history of political warfare during the Cold War.
In this week’s roundup, Dan takes a deeper dive into this history of presidential succession and what remains uncertain and could be tested in crisis. With the October 3rd and 4th anniversary of Operation GOTHIC SERPENT, better known as Black Hawk Down, Ethan looks at how the tragic lessons of that battle were incorporated into how our servicemembers train and fight today. Joshua looks at how the United Kingdom trying, in fits and starts, to adapt its defense (or defence) establishment and planning for the political warfare we face from Moscow, Beijing, and others undermining our societies. Our intern Thomas provides an analysis of the money laundering allegations in journalists’ reporting on the FinCEN files and reminds us why financial crimes are so pernicious. As always, the team breaks down news that you may have missed.
The Thorny Questions of Presidential Health & Succession
Dan Mahaffee
President Trump’s Covid diagnosis is yet another upending of the proverbial “political chessboard” in a year that has seen momentous event after momentous event. Given the power and prestige of the modern presidency — and the responsibilities placed on those shoulders — the health of the president has always been a matter of utmost public concern. Yet, for better or for worse, presidents have secrets. At times, protecting those secrets has been more important for the public interest, be it for matters of politics or security. We all know of Wilson’s stroke, FDR’s failing health before the 1944 election, and the uncertainty when President Reagan was nearly assassinated.
Presidential succession may appear clear-cut, but the 25th amendment and the Presidential Succession Act have unanswered questions of their own that could arise in time of crisis. With President Trump’s health thankfully improving, so too will his tenure in office be likely determined at the ballot box — and also, thankfully, with the legitimacy that enfers. From history’s more obscure lessons and concerning hypotheticals under consideration, it’s important to think through what issues could arise in future crises.
Not surprisingly, the first presidential health crisis was that of the first president, when George Washington caught the flu in 1790. As Gillian Brockell lays out in The Washington Post’s enjoyable Retropolis history series, the disease was also the first case where the political elite failed to social distance: Congress brought the influenza from Philadelphia to the then capital of New York City and Washington would fall ill after a visit from James Madison. There are many avenues of speculation as to how history might have turned out if George Washington had died before completing his two terms and peacefully leaving office. Additionally, while the Vice President was John Adams, Congress would not legislate further rules about the rest of the line of succession until 1792. At a time of an outbreak of a deadly disease — in an era where medical treatment was often deadlier — the entire leadership structure of the young United States could have been incapacitated, or worse.
It was John Tyler who first assumed the presidency from the vice presidency following the death of William Henry Harrison. Tyler rendered any uncertainty about the vice president taking office in such circumstances moot when he immediately took the oath of office — though the vice presidency would remain vacant as he served out the remainder of Harrison’s term. In this era, the Senate elected its president pro tempore, but as the Senate’s official history notes, this involved a little political chicanery:
Throughout most of the 19th century, the Senate assumed it was empowered to elect a president pro tempore only during the absence of a vice president. But what should senators do at the end of a session? Since Congress was customarily out of session for half of each year, what would happen in that era of high mortality rates if both the president and vice president died during the adjournment period and there was no designated president pro tempore? For decades, the Senate relied upon an elaborate charade in which the vice president would voluntarily leave the chamber before the end of a session to enable the Senate to elect a president pro tempore. Fearing that the presidency might thus accidentally slip into the hands of the opposition, vice presidents occasionally refused to perform this little courtesy when the opposing party held the Senate majority.
Congress would adjust presidential succession in 1886 to address this, and at that time, they removed the Congressional leaders — Speaker of the House and Senate President Pro Tempore — from the line of succession and went straight to the cabinet members. Before his presidency would be known for questions about presidential incapacity following his stroke, Woodrow Wilson also planned up a scheme to use the presidential transition act to immediately transfer power to his Republican opponent Charles Evan Hughes should he have lost the 1916 election. Wilson believed the international crisis of World War I required an immediate transfer of presidential powers with no lame duck period. If Wilson lost the election, he would request that his Secretary of State resign (the highest cabinet position in the line of succession), then he would recess-appoint Hughes to become Secretary of State, and then finally Wilson and his Vice President would simultaneously resign, immediately making Hughes president. How is that for transition planning?
The most recent version of the Presidential Succession Act was passed by Congress in 1947, and this restored the Congressional leaders to the line of succession. However the act placed the Speaker of the House third in line, rather than the President Pro Tempore, as the 1792 act had. President Truman himself weighed in on this — for political and personal reasons — as the Senate’s official history again provides some insight:
When the 1945 death of Franklin Roosevelt propelled Vice President Truman into the presidency, Truman urged placing the Speaker, as an elected representative of his district, as well as the chosen leader of the “elected representatives of the people,” next in line to the vice president. Since one could make the same argument for the president pro tempore, Truman’s decision may have reflected his strained relations with 78-year-old President Pro Tempore Kenneth McKellar and his warm friendship with 65-year-old House Speaker Sam Rayburn. After all, it was in Rayburn’s hideaway office, where he had gone for a late afternoon glass of bourbon, that Truman first learned of his own elevation to the presidency.
The 25th amendment to the Constitution had its genesis in the late 1950s to address the uncertainties of presidential succession and to address how a presidential incapacity might be addressed. Not only were there the lessons of the end of the Wilson administration, but also the more recent concerns as agreements to transfer duties from President Eisenhower to Vice President Nixon during times of Ike’s ill-health were found to have no constitutional foundation by their own Attorney General. The environment of the Cold War and hair trigger nuclear conflict only added to the need for clear lines of authority.
The 25th amendment would make clear what Tyler had done from the first instance — that the vice president becomes president should the president leave office. Second it would allow a president to appoint a replacement vice president with the majority vote of two houses of Congress. It would allow for the president to declare that he needed to temporarily transfer authority to the vice president, as well as for a majority of the cabinet and the vice president to declare the president incapacitated. Should the president challenge the assessment of incapacity by the vice president and cabinet, it would require a two-thirds vote of each chamber of Congress to overrule the presidential objection.
However, as straightforward as the 25th amendment seems, there is a lot of trust in the individuals involved to think solely of the national interest and institutional stability in assessing presidential capacity. How might Congress respond to such an issue in our era of tribal partisanship? How would the nation respond if a split decision came down from Congress on a question of presidential incapacity? Are cabinet members driven more by their loyalty to the president — and the impact on their political and financial futures — more than their oath of office? All are considerations when there is the mixture of hyper-partisanship, personality-driven politics, and increasingly aged politicians.
Finally, there are the unresolved constitutional questions raised by the Presidential Succession Act that have never been answered. As noted, the Speaker of the House and President Pro Tempore were restored in the line of succession in 1947, but what of the separation of powers if positions in the Executive Branch were to be taken over by a leader of the Legislative Branch. Yes, there is a sense of greater electoral legitimacy compared to a presidentially-appointed and Senate-confirmed cabinet member. However, as legal scholars Akhil Amar and Vikram Amar analyzed the likely unconstitutionality of current law on separation of powers, they also point to both the perverse incentives that this would create for simultaneous impeachment of the president and vice president and how this blurs the line with the parliamentary structure of executive power that the framers explicitly rejected. It might be worth having the practical discussion about whether the President Pro Tempore position is properly chosen given its role. Since 1890, it has been the most senior member of the Senate majority, and at times this has meant that Senators Strom Thurmond, Robert Byrd, and, currently, Chuck Grassley, have been in fourth in line for the presidency at the respective ages of 99, 92, and 87.
While this analysis is helpful for future political bar trivia nights or future writers for a West Wing remake, the unresolved issues around presidential succession remain. Obviously there are the times that the 25th amendment has been discussed about this administration — both from inside and out. Still, there are the future crises that we cannot anticipate. AEI scholar and CSPC Triumphs and Tragedies series co-editor Norm Ornstein laid out just how uncertain the laws and process could be in the horrific, yet plausible, scenario of a “suitcase nuke” detonated during an inauguration. These serious matters of ensuring that our institutions remain sound and that presidential authority remains clear in times of crisis should go beyond our partisanship. Hopefully, our immediate concern about needing to use any of these authorities immediately abates, but it would behoove us to address this before any future crisis lays bare the gray areas and inconsistencies in this very serious matter.
Operation GOTHIC SERPENT: The Battle of Mogadishu
Ethan Brown
Of all the public events to have been canceled/restricted during the COVID-19 pandemic, the one which I felt a particular pang of regret for was being unable to participate in the annual “Mogadishu Mile”, a commemorative 5k race hosted by the 3rd Ranger Battalion, 75th Ranger Regiment, based out of Ft. Benning (Columbus), GA.
Few instances in life are as humbling, and motivating, as standing in the massive crowd at the (blocked off) intersection of 11th st. and Broadway, while the still-living members of Bravo company, 3/75, participants in the infamous “Black Hawk Down” mission, stand on the raised platform before Iron Bank Coffee and join the current Battalion Sergeant Major in reciting the Ranger Creed. First, the Sergeant Major will bellow a stanza, and the crowd of several thousand repeats the line. Emotionally stirring to say the least.
While direct support to 3/75 as an Air Force JTAC in the 17th Special Tactics Squadron, I had the penultimate honor of being aligned with none other than Bravo Company, 3/75. The Platoons still use the same logos/iconography of their progenitors in 1993, with 2nd Platoon (my supported team) still flying their “Voodoo Doll” flag. The “COF” (Company Operational Facility) that houses the multiple companies under the Battalion is an innocuous brick structure surrounded by a chain-link fence, and if a passerby didn’t know it, the compound would hardly register as home of one of the most distinguished units in U.S. military history. I was fortunate to have deployed three times with 3/75, and can vouch for the dedication to service, professionalism, and superb technical combat lethality of these U.S. Army Rangers.
So when October 3–4 rolls around every year, it means a little more on Fort Benning than most other locations in the Army. On this date, 27 years ago, members of B Co., 3rd Battalion, 75th Ranger Regiment, C Squadron/1st Special Forces Operational Detachment-Delta, the 24th Special Tactics Squadron, crews of the 160th Special Operations Aviation Regiment, as well as soldiers from the 10th Mountain Division, were engaged in a bloody battle on the streets of Mogadishu, resulting in 19 U.S. killed in action, 70 wounded, and (sources vary) between 350–1000 enemy insurgents killed. Two UH-60 Black Hawk helicopters were shot down, and the targets of the day-time raid- several top aides to the Habr Gidr clan’s leader (Muhammed Farah Aideed) were successfully captured, but Aideed was not located.
The story is well known, having received a Hollywood adaptation in the 2001 hit-film “Black Hawk Down” following the Mark Bowden book of the same name. Admittedly, I superstitiously refused to watch the movie during my time aligned with 3/75, for the obvious bad-luck implications, but the movie generally follows the actual events with stirring accuracy. Rather than re-scripting the story for Roundup consumption, this analysis will point out some of the lessons learned from that day, lessons which live in the training scenarios of today’s special operations, while adding some lesser-known facts about the mission and its participants.
The Human Terrain
Operation Gothic Serpent was the special operations mission, concurrent alongside the UN peacekeeping mission to help secure the international food supplies shipped into Somalia during a horrific, famine-wasted civil war in the early years of the Clinton administration. Having just emerged from the first “shock and awe” era of Desert Storm combat, U.S. forces were riding high, yet poorly prepared for the type of counterinsurgency that would dominate U.S. national security strategy for the following three decades. This was no more true than navigating the “human terrain” of downtown Mogadishu.
A staple of the special operations enterprise is precision nighttime direct action raids. For reference, the raid to kill Osama Bin Laden and ISIS leader Abu bakr Al-Bagdahdi were flown under cover of absolute darkness, offering U.S. forces the distinct advantage thanks to superior technology (night vision devices, multi-spectrum aircraft sensors, encrypted communication suites and the like). In Mogadishu, the politically sensitive theater did not offer the option of conducting such offensive operations targeting insurgent leaders, those responsible for much of the food seizure and civilian suffering rampant in the city. Thus, the raid to capture valuable insurgent leaders was conducted in broad daylight, in the crowded and dusty streets at the busiest part of the day. This human terrain was both literal, thanks to the crowds present, and figurative, where the sudden appearance of U.S. military forces approaching in helicopter and convoy formats was undoubtedly a chaotic and sudden shock for the local Somali’s.
Nothing is more chaotic than when Murphy and his law show up to the gunfight. Because the worst time is indeed when things tend to go wrong. Admittedly, contingency planning would have prevented many of the things that went wrong that day, and such planning considerations have become the hallmark of special operations mission preparation. But on October 3, 1993, far too many presumptions were made, and it would later bite Task Force Ranger hard.
It should be noted that many members of the assault force were lacking actual combat experience—only a handful were veterans of Panama, Grenada, or Desert Storm—and there was little frame of reference for the rigors of a gunfight. Recall that, unlike the most recent 20 years, U.S. special operators were not under the draw of constantly rotating deployments. Many of the Rangers were new to the Army, some having only passed the Ranger selection course shortly after graduating high school. Many soldiers in the 10th Mountain Division had never been trained on how to open the doors of the U.N. armored personnel carriers (such door handles are quite unlike the ones on your car).
The lack of experience meant the assault force would repeat techniques used in the previous six missions of the deployment, providing a pattern for enemy insurgents to predict and then ambush accordingly. Today, special operations teams take great care to alter their assault plans, infil methods, and force organization, tailored to each target. On the day of the fateful mission in downtown Mogadishu, the assault force did not bring the necessary equipment and resources to accommodate the contingency planning, which didn’t take place (“you’re not gonna need [night vision goggles] Grimesy, we’ll be back before dark”). The command and control (lines of command authority designating who on the ground made the movement decisions) was unclear and confusing, especially for the U.N. peacekeeping forces who would later be requested to go into the city and help extract the assault force.
Urban combat was hardly an emphasized modus of realistic training in those days. “Stacking on the wall”, where a line of assaulters are separated by about 4 feet, each moving about one foot away from the wall, resulted in a target-rich line for insurgents mounted on rooftops and vehicles patrolling the streets in response to the chaos unfolding at the target building. Those rangers were trained in the shoot-move drills of the jungles of Vietnam and the sands of the open desert. The movements here were conducted as entire platoons (50–70 soldiers) moving from place to place, rather than fire and maneuvering being delegated down to the squad level (8–12). Add in the fact that communications in an urban environment, even with the use of lower-frequency FM modulation, is spotty at best.
Unsung Heroes and the original “Mogadishu Mile”
Again, the movie does a tremendous job of retelling the specific events of the raid, but the stirring bravery and relentless will of the operators who were forced to fight for their lives during the 20-hour ordeal dominate the story- SFC Randy Shugart and MSG Gary Gordon were killed defending the first crash site for SUPER61. While the ground force attempted to move on foot to the first crash site, Earl Fillmore, a Delta operator, was killed by enemy gunfire. Delta SSG’s Daniel Busch and Jim Smith demanded to be inserted into the same site via MH-6 Little Birds, and Busch later died of gunshot wounds sustained while trying to recover the remains of 61’s crew. Five Rangers and one Delta operator were part of a contingent of vehicles that became separated from the original assault convoy, and all were either killed on scene or passed from their wounds after exfil (CPL Jamie Smith, SP4 James Cavaco, SGT James Joyce, SGT Lorenzo Ruiz, and SGT Richard Kowalewski [Ranger]; SFC Grizz Martin [Delta]).
As stated, command and control and the political sensitivities were a difficult quagmire to navigate, which is why the U.N. forces relief convoy was slow to depart the international airport—where peacekeeping forces were arrayed—in order to help recover the assault force and collect the wounded and dead of the crash sites. The U.S. Army’s 10th Mountain Division does not receive enough credit for their efforts to respond to Task Force Ranger, and a documentary by retired Col. Randall Larsen named “Blackhawk Down: The Untold Story” excels in bringing to light this unheralded part of the events.
The convoy finally entered the city in the middle of the night, led by Task Force 2–14 of the 10th Mountain Division, arriving at the crash sites around 2AM. As if to add insult to injury, there still wasn’t enough room to safely load all of the assault force personnel, wounded and healthy, into the APCs and trucks. This forced much of the ground team who were still able to move under their own power, to conduct an unprotected exfil out of a still incredibly hostile, enemy dominated urban battlezone.
That last leg of the mission was conducted on foot under harrowing enemy gunfire. A mixture of Delta operators and Army Rangers finally returned to base at 630AM on October 4th. Their final leg has since been memorialized as the “Mogadishu Mile”.
Political Warfare & the Future of British Defense Policy
Joshua C. Huminski
At the end of September, the United Kingdom’s Chief of the Defence Staff, General Sir Nick Carter addressed the Policy Exchange on the global state of conflict and introduced the Integrated Operating Concept 2025 — the response to this state of play.
General Carter’s Policy Exchange tour de horizon asserted that Russia and China were conducting “political warfare” that was “designed to undermine cohesion, to erode economic, political and social resilience, and to compete for strategic advantage in key regions of the world.” Moscow and Beijing seeks to “win without going to war: to achieve their objectives by breaking our willpower, using attacks below the threshold that would prompt a war-fighting response”. According to General Carter “None of our rivals can afford to go to war as we define it. They want to win below that threshold.”
General Carter’s address and the Integrated Operating Concept 2025 are seen as preludes to the forthcoming Downing Street-led integrated review of defense and security, expected in late November. Ministers are denying that this review is a cost-cutting exercise, but in a post-Brexit environment and with few active deployments, the fears that Downing Street may look for efficiencies and savings is understandable. The United Kingdom has roughly 1,000 personnel in Afghanistan, and 1,400 in Iraq and Syria as part of anti-ISIS operations — down well from the peak of hostilities in both regions.
In light of this context, General Carter’s statements are not surprising. By asserting the sub-kinetic activities of Great Britain’s adversaries and tying those activities to the military directly, General Carter is likely hoping to stave off any serious cuts to the defense budget. Concurrently, he is hoping to buttress the military’s arguments for technological innovation. According to General Carter, “More of the same will not be enough.” He added, “We must fundamentally change our thinking if we are not to be overwhelmed.”
“Expensive, crewed platforms that we cannot replace and can ill-afford to lose will be increasingly vulnerable to swarms of self-coordinating smart munitions — perhaps arriving at hypersonic speeds or ballistically from space — designed to swamp defences already weakened by pre-emptive cyber attack.” General Carter is not wrong, but perhaps misses some of the point.
At a macro, strategic level, the Integrated Operating Concept leaves a bit to be desired. If one removes the contemporary language and framing, the Integrated Operating Concept could have been published at nearly any point in the post-World War II environment: “integrated across all domains”, “integrated nationally”, “engaged internationally”, “postured more assertively”, “continuously seeking information advantaged”, all reside under the umbrella heading of “optimized for effect”. It is not hard to imagine the Earl Mountbatten of Burma or Sir Terence Lewin issuing something similar during their tenures as Chief of the Defence Staff.
The efficacy of the Integrated Operating Concept and the attempts to prevent budget cuts remains to be seen as the prescribed solution is somewhat disconnected from the identified disease. Political warfare, fake news, disinformation, “lawfare”, and other concepts addressed in the government’s publication are all non-kinetic activities against which conventional military assets have little to no utility. Investing in drone swarms, loitering munitions, next generation armor assets, or aircraft carriers, while sensible for conventional adversaries are little use against online trolls.
Sufficiently responding to political warfare necessitates skills that are not natural to conventional military forces. Rather, a whole-of-government response that leverages the capabilities of SIS, GCHQ, MI5, the Home Office, and the Foreign, Commonwealth, and Development Office are needed in much greater quantities. To be sure, conventional forces aligned against the novel threats identified in the Integrated Operating Concept are needed, but to suggest that investing in those assets will have utility in a political warfare fight is being too cute by half.
Including kinetic and non-kinetic operations in the Integrated Operating Concept is sensible, but it must be caveated that not everything is the military’s responsibility. Here the concept is woefully lacking. If everything is a priority for the military, then nothing is a priority for the military.
Equally, if the Ministry of Defence allocates investments and limited budgetary dollars against non-kinetic, non-conventional threats such as subversion or political warfare, cuts must be made elsewhere. If you invest in drone swarms and AI-systems, will you sacrifice Challenger 2 main battle tanks and FV432 Mark 3s, both of which are critical for conventional urban operations?
Russia’s annexation of Crimea, the ongoing political warfare campaigns throughout Europe, and China’s “lawfare” campaign have all illustrated the need for a truly joint and integrated operating concept for the West’s national security apparatuses. The militaries of Washington and London cannot be expected to do everything, especially in a time of increasingly tight budgets, to say nothing of the spreading of skill sets and competencies.
The forthcoming integrated defense and security review will be worth watching. If the review recognizes the need for a whole-of-government response and allocates funding accordingly, there will be cause for optimism. If, however, the review is either more of the same, fails to make difficult choices in terms of prioritization, and excessively relies upon the military to solve all the problems, one should not be confident about the policy direction of Whitehall.
Uncovering 0.02% of the problem: suspicious transactions leaked
Thomas Triedman
Tim Wiswell, the young Head of Russian Equities at Deutsche Bank, was nicknamed the “Wiz” by his colleagues. He was, after all, a “rock star” in the world of finance, leading Deutsche Bank’s efforts to plant a flag in the Russian financial markets. The 36-year old trading phenom leaned into Moscow’s heavy-drinking, hard-partying culture, eventually referring to the city as the “wild, wild East.” The music stopped for Wiswell in 2015 when Deutsche’s Russian Equities Desk was found to have laundered around $10 billion by “mirror trading” — that is, buying equities using rubles and simultaneously selling them in exchange for dollars, euros, or pounds, a process that duped law enforcement for years. Wiswell, the mastermind behind the mirror trading, quickly left the country, setting up a Russian-owned surfing camp for young children in Bali.
At the time, media outlets were arguably as interested in Tim Wiswell’s life as they were in the crime that he enabled. Tim Wiswell has filled his post-Deutsche years vacationing in Japan, Italy, and the South of France in a spectacularly public fashion. He fit neatly into a narrative that had been building in the United States for years, especially after 2008 — that reckless finance can spread harm throughout society, and that the offenders are often isolated from the damage and are punished relatively leniently. A confluence of conditions — Tim Wiswell’s personality, a suspicion of banking in the wake of 2008, and the simplicity of the scandal — allowed the story of the Deutsche scandal to be packaged for public consumption.
But the most recent revelation in the world of financial crime doesn’t have a Tim Wiswell. It is complex, a bit unwieldy, and no one can agree on who to blame. Just a couple weeks ago, BuzzFeed News and the International Consortium of Investigative Journalists released excerpts from 2,100 unlawfully leaked suspicious activity reports (SAR), documents detailing around $2 trillion worth of transactions that banks deemed suspicious enough to send over to law enforcement. The dirty cash passed through at least five global banks including JPMorgan Chase and Deutsche Bank.
It initially seems appropriate to blame the banks that are, after all, approving the transactions and moving the money. But that would not necessarily be a fair assessment. When banks are prompted to process a suspicious transaction, they can either freeze the assets until law enforcement investigates the situation, or they can process the transaction, file a SAR, and collect the fee. The latter option effectively uses SARs as vehicles to move banks’ money laundering risk onto the Financial Crimes Enforcement Network (FinCEN). This option also turns a profit for the banks and saves them sleep, but leaves FinCEN to read through thousands of SARs and to take quick action — which rarely happens. While the FinCEN files reveal that banks facilitated the circulation of dirty money, they also highlight how little FinCEN has done to stymie these transactions and the “trail of ruin” they cause.
The huge collection of unresolved SARs indicates that FinCEN may be in above its head. As former federal prosecutor Richard Elias admits, FinCEN does not have “enough resources in the government to meaningfully go through them all [the SARs].” This problem will only get worse. As banks’ anti-money laundering (AML) technology becomes increasingly complex and sensitive, more SARs are filed and FinCEN is, as a result, left to drink from an even stronger firehose. In fact, loan and finance companies have increased the number of SARs from 84 in 2014 to almost 26,000 in 2019, most likely due to banks’ adoption of smart technologies that allow such close surveillance of capital flow. Additionally, banks have no incentive to limit the amount of SARs they file; the risk of being fined for having neglected suspicious activity far outweighs the minor inconvenience of submitting an additional report to authorities.
FinCEN is not oblivious to this issue. Even before the volume of filed SARs increased so dramatically in 2018, FinCEN updated their filing system in an attempt to keep up with the banks, but the reform was seemingly more focused on creating a user-friendly experience than it was on developing the critical infrastructure that would allow FinCEN to identify crime. On a positive note, FinCEN and the banks currently create and edit a joint watchlist to prevent known bad actors from accessing the financial system; more collaboration like this may help FinCEN more quickly respond to suspicious transactions.
As was the case with Tim Wiswell at Deutsche Bank, money crime often becomes cinematic in nature — exciting and dramatic but seemingly so foreign and removed from the average person. Maybe this is why there was such an appetite for Deutsche’s mirror trading scandal in 2015: We like watching crime unfold as long as we feel shielded from it. But the recent investigation tells a different story. Money laundering and other financial crime — beyond supporting regimes like North Korea — directly threatens Americans. One of the most jarring examples details the explosion of an American steel plant, one of the many shell-companies involved in cleaning the Ukrainian oligarch Ihor Kolomoisky’s money. As Ihor Kolomoisky expanded his network of shady real-estate purchases across the country, he left in his wake shuttered companies, laid-off workers, and frightfully poor working conditions.
Broadly speaking, “money laundering is a crime that makes other crime possible.” Further, money laundering is a crime that creates criminals; when bad actors know that their spoils can be easily laundered, they may be incentivized to commit crime — and more of it. And money laundering can have disastrous effects on the real economy. Aside from eroding the integrity of the financial system in the long term, small economies are especially at risk: laundered money may corner certain sectors of their economies, artificially propping up certain businesses and harming the broader private sector; additionally, laundered money may create disruptions and bubbles in a small country’s financial system, as criminals are more preoccupied with hiding their money than generating a return.
Large as the recent investigation may seem, the leaked SARs account for less than 0.02% of SARs filed. Imagine what surprises await in the other 99.98 percent! As the financial system grows and becomes increasingly global, we must brace for impact and best position ourselves to eradicate this crime for the sake of our security.
News You May Have Missed
Lawmakers Seek Sanctions Over Report Turkey Used Russian Anti-Air System to Track Greek F-16
Senators Chris Van Hollen (D-MD) and James Lankford (R-OK) have pushed the administration to sanction Turkey in a recent letter to Secretary of State Mike Pompeo. This comes after reports that Turkey used the advanced Russian-made S-400 anti-air system to track a U.S.-made F-16 flown by NATO-ally Greece. The S-400 purchase remains a point of contention between Washington and the NATO allies versus Ankara, but as recent roundups have noted, ties with the Erdoğan regime continue to grow frayed. That the system is being used to track and possibly gather data on U.S.-made equipment has angered lawmakers who accuse the administration and Defense Department on dragging their feet from removing Turkey from the more advanced F-35 program.
2020 Atlantic Hurricane Season on Track to Be Most Active Ever
Eric Dai
With the formation of now-Hurricane Delta in the eastern Caribbean, the 2020 Atlantic hurricane season is poised to be the most active on record. Every year, the National Hurricane Center designates a list of 21 potential names for each hurricane season’s tropical storms and hurricanes, and if those names are exhausted, subsequent storms are named after the letters of the Greek alphabet. This Greek letter naming system has only been used twice, first in 2005 (the most active season recorded) and now in 2020. Hurricane Delta, the 25th named storm of the 2020 Atlantic hurricane system, formed more than a month earlier than the 25th named storm did in 2005, putting 2020 on track to surpass the 2005 Atlantic hurricane season as the most active ever recorded.
Supreme Court Hears Google, Oracle Software Copyright Case
Eric Dai
The Supreme Court is currently hearing arguments in Google LLC v. Oracle America, Inc., a copyright case that could have wide-reaching consequences for the software industry. Oracle Corporation, which owns Java Systems after a 2010 purchase, alleged that Google violated copyright law over its use of Java APIs in developing its Android operating system. APIs, or application programming interfaces, are units of code that allow different applications to communicate with each other and work across different devices. Although Google claims that such use of APIs falls under fair use, Oracle argues that APIs are an “expressive work” and are therefore eligible for copyright protection. If the Supreme Court decides that Google’s use of Java APIs did in fact violate copyright law, its ruling would have major ramifications for tech companies, possibly forcing them to either pay licensing fees to other companies for their APIs or develop their own APIs.
The DoD Wants a +500-Ship Navy by 2045
Oscar Bellsolell
Secretary of Defense Mark Esper has unveiled the Navy’s plan to have more than 500 operative ships by 2045. The Pentagon wants to neutralize China’s efforts to modernize and match the U.S. Navy in the coming decades. This future fleet — which has been dubbed Battle Force 2045 — will incorporate both manned and unmanned ships, including aircraft carriers, large combat vessels, and attack submarines. The 2018 National Defense Authorization Act required the U.S. military to reach a number of 355 battle force ships “as soon as practicable,” but there are currently little less than 300 ships in the fleet. Esper has said Congress will be notified on the details of the plan shortly, but with current fiscal constraints and budgetary cuts, the Navy will not get these 355 ships anytime soon.
“President Donald J. Trump Defeats COVID” Coin Now on Sale!
Oscar Bellsolell
You can pre-order a commemorative coin marking President Trump’s survival to the coronavirus disease at the White House Gift Shop (disclaimer: not affiliated to the White House). Priced at $100, the collectible is placed in the “Historic Moments for President Trump” series and will be a numbered limited edition. The President encouraged Americans not to fear the virus upon his return to the White House on Monday, three days after being admitted to the Walter Reed Medical Center following a positive diagnosis on COVID-19.
Taiwan and Somaliland Forge Diplomatic Ties
Thomas Triedman
Taiwan and Somaliland, both unrecognized but de-facto nations, are in the process of establishing diplomatic ties. Over the summer, Somaliland and Taiwan traded “representative offices,” hoping to bolster each other’s legitimacy. There are also economic and geopolitical concerns involved in this unlikely partnership. According to Somaliland’s deputy foreign minister Liban Yusuf Osman, “Taiwan… has economic advancement we can learn a lot from,” and hopes that Taiwanese business will set up shop in Somaliland. And, because China forces other countries to choose to have relations with either Taiwan or China, but not both, Taiwan is increasingly starved for helpful allies.
The views of authors are their own and not that of CSPC.