For over ten years, the United States has been attempting to identify, penetrate, disrupt, and dismantle a myriad of financial networks of rogue regimes, proliferators, terrorist groups, state sponsors of terrorism, and criminal syndicates. Juan Zarate, one of the chief architects of this strategy, recently released his first book; Treasury’s War – The Unleashing of a New Era of Financial Warfare. The insider’s account both pulls back the curtain of this shadowy world and gives a sobering assessment of many of the new financial threats we will be facing in the coming years.
Many readers know Juan Zarate as a national security commentator for CBS News. His perspective and insights originate from his former positions as Deputy Assistant to the President and Deputy National Security Advisor for Combating Terrorism and the First Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes.
I know Juan as my well-respected former boss at the Department of Treasury. He is hard-working, a gentleman, and a patriot.
In the book, Zarate argues convincingly that “money is a common denominator that connects disparate groups and interests-often generating networks of convenience aligned against the United States. Money is their enabler. It is also their Achilles’’ heel.”
Zarate describes how after September 11 a small cadre of dedicated professionals within Treasury used imagination and innovative tactics to unleash a new type of financial warfare that harnessed the use of the dollar as the world’s primary currency, access to the American financial markets, globalization, new forms of financial data and intelligence, freezing orders, regulatory actions, and “smart” new applications of sanctions and designations to undermine American foes including Saddam Hussein’s Iraq, Iran, North Korea, Syria, narco-terrorists, kleptocrats and others
As a proud former Treasury Special Agent, I appreciated finally getting an insider’s account of how Treasury’s enforcement arm (Customs, ATF, and the Secret Service) was amputated at the time of the creation of the Department of Homeland Security. Many of us are still bitter. The last ten years have demonstrated that our anti-money laundering and counter-terrorist finance efforts have suffered over this myopic and politically expedient decision. As I have argued for years, and Zarate makes clear, there is a need for a reinvigorated Treasury enforcement arm to focus on illicit financial flows.
Another section of the book that I found very important is when Zarate masterfully lays out many of the threats we face in the “coming financial wars.” It is sobering reading, particularly because we are simply not prepared.
I applaud the book. However, it is important to understand that Zarate writes from a 30,000 foot policy maker’s perspective. During much of the same time frame and particularly in the years immediately preceding September 11, my vantage point was that of a financial crimes investigator at the street level. As a result, our assessments – though not our objectives - are vastly different. In my first book, Hide & Seek: Intelligence, Law Enforcement, and the Stalled War on Terror Finance (Potomac Books, 2006) I discuss from a ground level viewpoint the actual implementation of our anti-money laundering / counter-terrorism policies both in the United States and overseas.
For example, over the years successive administrations, politicians from both parties, and apologists for Treasury have praised a series of “tough new sanctions” designed to squeeze our adversaries While this is not the space to debate the efficacy of sanctions, my views have been shaped by investigations of “sanctions busters” in places like Dubai. I would also like to point out that in 2012 the Director of National Intelligence testified that sanctions have had “zero effect” in slowing Iran’s nuclear program. Or to quote an anonymous retired diplomat, “Sanctions always accomplish their principal objective, which is to make those who impose them feel good.”
In addition, Zarate makes no mention of the U.S. 2007 National Anti-Money Laundering Strategy (see: http://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/nmls.pdf). This is an important policy document that overlapped Zarate’s tenure. Most observers feel that the implementation of our strategy has been a colossal failure. Nor has there been any accountability for the various agencies and departments involved including Treasury. For example, in the book there was no mention of the long-term dysfunction of Treasury’s Financial Crimes Enforcement Network (FinCEN) charged with implementing many of the Strategy’s action-items.
And despite Treasury’s Wars upbeat pronouncements and pats-on-the-back, the fact remains that according to the United Nations Office of Drug Control (UNODC), less than one per cent of global illicit financial flows is currently being seized and frozen. It is probably about the same in the United States. In my opinion, a one percent success rate is nothing to boast about.
Zarate does make clear that despite our myriad of new financial tools and countermeasures, our adversaries adapt. And they continue to use effective but simple techniques such as bulk cash smuggling. To put things in perspective, in the United States, our success rate in intercepting bulk cash along the southwest border is approximately .0025 percent!
Indigenous, underground banking systems such as hawala are also almost impervious to the kinds of financial countermeasures described Treasury’s War. To help bring this threat alive, I recently released my first novel, Demons of Gadara. The realistic story told from the vantage point of ground level demonstrates how our adversaries use value transfer and hawala in an act of terror.
Zarate is right to say we are in a “new era” of financial warfare. To me the era is not reassuring. It is frightening.
Many readers know Juan Zarate as a national security commentator for CBS News. His perspective and insights originate from his former positions as Deputy Assistant to the President and Deputy National Security Advisor for Combating Terrorism and the First Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes.
I know Juan as my well-respected former boss at the Department of Treasury. He is hard-working, a gentleman, and a patriot.
In the book, Zarate argues convincingly that “money is a common denominator that connects disparate groups and interests-often generating networks of convenience aligned against the United States. Money is their enabler. It is also their Achilles’’ heel.”
Zarate describes how after September 11 a small cadre of dedicated professionals within Treasury used imagination and innovative tactics to unleash a new type of financial warfare that harnessed the use of the dollar as the world’s primary currency, access to the American financial markets, globalization, new forms of financial data and intelligence, freezing orders, regulatory actions, and “smart” new applications of sanctions and designations to undermine American foes including Saddam Hussein’s Iraq, Iran, North Korea, Syria, narco-terrorists, kleptocrats and others
As a proud former Treasury Special Agent, I appreciated finally getting an insider’s account of how Treasury’s enforcement arm (Customs, ATF, and the Secret Service) was amputated at the time of the creation of the Department of Homeland Security. Many of us are still bitter. The last ten years have demonstrated that our anti-money laundering and counter-terrorist finance efforts have suffered over this myopic and politically expedient decision. As I have argued for years, and Zarate makes clear, there is a need for a reinvigorated Treasury enforcement arm to focus on illicit financial flows.
Another section of the book that I found very important is when Zarate masterfully lays out many of the threats we face in the “coming financial wars.” It is sobering reading, particularly because we are simply not prepared.
I applaud the book. However, it is important to understand that Zarate writes from a 30,000 foot policy maker’s perspective. During much of the same time frame and particularly in the years immediately preceding September 11, my vantage point was that of a financial crimes investigator at the street level. As a result, our assessments – though not our objectives - are vastly different. In my first book, Hide & Seek: Intelligence, Law Enforcement, and the Stalled War on Terror Finance (Potomac Books, 2006) I discuss from a ground level viewpoint the actual implementation of our anti-money laundering / counter-terrorism policies both in the United States and overseas.
For example, over the years successive administrations, politicians from both parties, and apologists for Treasury have praised a series of “tough new sanctions” designed to squeeze our adversaries While this is not the space to debate the efficacy of sanctions, my views have been shaped by investigations of “sanctions busters” in places like Dubai. I would also like to point out that in 2012 the Director of National Intelligence testified that sanctions have had “zero effect” in slowing Iran’s nuclear program. Or to quote an anonymous retired diplomat, “Sanctions always accomplish their principal objective, which is to make those who impose them feel good.”
In addition, Zarate makes no mention of the U.S. 2007 National Anti-Money Laundering Strategy (see: http://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/nmls.pdf). This is an important policy document that overlapped Zarate’s tenure. Most observers feel that the implementation of our strategy has been a colossal failure. Nor has there been any accountability for the various agencies and departments involved including Treasury. For example, in the book there was no mention of the long-term dysfunction of Treasury’s Financial Crimes Enforcement Network (FinCEN) charged with implementing many of the Strategy’s action-items.
And despite Treasury’s Wars upbeat pronouncements and pats-on-the-back, the fact remains that according to the United Nations Office of Drug Control (UNODC), less than one per cent of global illicit financial flows is currently being seized and frozen. It is probably about the same in the United States. In my opinion, a one percent success rate is nothing to boast about.
Zarate does make clear that despite our myriad of new financial tools and countermeasures, our adversaries adapt. And they continue to use effective but simple techniques such as bulk cash smuggling. To put things in perspective, in the United States, our success rate in intercepting bulk cash along the southwest border is approximately .0025 percent!
Indigenous, underground banking systems such as hawala are also almost impervious to the kinds of financial countermeasures described Treasury’s War. To help bring this threat alive, I recently released my first novel, Demons of Gadara. The realistic story told from the vantage point of ground level demonstrates how our adversaries use value transfer and hawala in an act of terror.
Zarate is right to say we are in a “new era” of financial warfare. To me the era is not reassuring. It is frightening.
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