Concealing financial flows can be harder than avoiding surveillance of emails and phone calls.
Jimmy Gurule remembers struggling for a seat at the table with his counterparts from U.S. intelligence agencies when he was an undersecretary of the Treasury a decade ago. In those days, the Treasury Department was a minor player in the world of three-letter spy agencies — CIA, NSA, DIA (Defense Intelligence Agency).
“It was hard for us to get an audience, it was hard for us to be invited to the meeting,” said Gurule, now a law professor at the University of Notre Dame in Indiana. “There were these intelligence meetings and we were like, ‘We want to have a seat at the table’ and they’d say, ‘Naw, what you’re doing isn’t that important.’ ”
Economic and financial intelligence is critical to targeting and enforcing sanctions against Iran, North Korea and Russia; strangling the flow of money to terrorist organizations, drug cartels and weapons traffickers; tracking nuclear proliferation; and assessing the strength of nations such as Russia and China that are now part of the global economy.
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Treasury personnel in Washington, D.C. — and in Afghanistan, Pakistan and the Persian Gulf — have worked with intelligence and military colleagues to attack the finances of the Taliban, al-Qaida and other terrorist groups. The department has provided expertise and actionable intelligence to civilian and military leaders through “threat finance cells” for Afghanistan and Iraq, and worked elsewhere with the U.S. Special Operations Command.
How much the intelligence mission has changed is highlighted by the move this month by David Cohen, the Treasury undersecretary for terrorism and financial intelligence to become deputy director of the Central Intelligence Agency. Cohen, 51, whose Treasury responsibilities included sanctions policy, replaces Avril Haines, a lawyer who’s now President Obama’s deputy national security adviser.
It’s the first time a Treasury official has moved into such a senior CIA post. That has been noticed in the intelligence community, where the Treasury has become a recognized power, and among the specialized legal and financial community affected by the nation’s increasing use of economic coercion against adversaries.
“Financial intelligence is incredibly important, and it’s much more important than it used to be,” said attorney Christopher Swift, a former Treasury official who investigated financing of terrorist groups and weapons proliferators. “Cohen’s move to CIA underscores that.”
Financial intelligence has come into its own as the U.S. increasingly turns to sanctions, asset freezes and other financial actions to thwart adversaries from al-Qaida operatives to Russian President Vladimir Putin. It’s a tactic that Ian Bremmer, the president of New York-based Eurasia Group, recently called the “weaponization of finance.”
The U.S. strategy is “premised on the simple reality that all of our adversaries, to one degree or another, need money to operate, and that by cutting off their financial lifelines, we can significantly impair their ability to function,” Cohen said at a conference in London in June.
Financial intelligence exposes vulnerabilities of adversaries — whether nations or individuals — who need access to the global financial system. Concealing financial flows can be harder than avoiding surveillance of emails and phone calls, which terrorists have tried to do in the aftermath of Edward Snowden’s disclosures about U.S. communications intercepts.
“When people think about intelligence, they think about James Bond and running operations against the Russians or the Chinese, and that still goes on and we shouldn’t diminish the importance of it,” said Swift, an adjunct professor of national security studies at Georgetown University in Washington, D.C.
“But if you’re looking at the other types of organizations in the global community that are causing problems for the United States and its allies, a lot of them are nonstate actors, they’re criminal syndicates, they’re narcotics syndicates, they’re transnational terrorist syndicates, and the best way to figure out how those organizations work, who’s part of those organizations, and the best way to degrade those organizations is follow the money,” he said.
The U.S. government has vastly expanded its collection and use of financial intelligence, bolstered by a series of post-9/11 laws and executive orders that have given the Treasury Department a leading role in financial intelligence and sanctions. The Treasury Department has more than 700 personnel dealing with terrorist and financial intelligence.
The Treasury’s Terrorist Finance Tracking Program, which has access to the Swift international banking transaction network, participated in investigations into the 2013 Boston Marathon bombing, threats to the 2012 London Summer Olympic Games and the 2011 plot to assassinate the Saudi Arabian ambassador in D.C., which U.S. officials said originated with senior members of the Quds force of Iran’s Islamic Revolutionary Guards Corps.
The Financial Crimes Enforcement Network, a part of the Treasury’s intelligence operation that regulates the financial industry to prevent money laundering and terrorist financing, receives more than a million reports a year on potentially suspect cash movements from financial institutions, Cohen said in a speech in January. FinCen’s information, combined with data from other sources, assists investigators in “connecting the dots” involving sometimes previously unknown individuals and businesses, according to the Treasury.
With time and experience, the Treasury has become “better and better at mapping the networks of illicit actors, or the bad guys,” said Elizabeth Rosenberg, a former senior adviser to Cohen who’s now a senior fellow at the Center for a New American Security, a Washington policy group.
In responding to the hacking of Sony Pictures Entertainment computers, Obama imposed sanctions on 10 senior North Korean officials and three state organizations to impose a further cost on the leadership in a country that’s already heavily sanctioned for its nuclear and missile programs.
In responding to Russia’s actions against Ukraine, Rosenberg said, it was “necessary to find a really narrow target set in order to make sure the pain falls exclusively or primarily on Russia” and as little as possible on European and U.S. companies. The innovation in September was to impose sanctions that included prohibitions on dealing in certain Russian equity and debt instruments to put pressure on the country’s central bank, she said.
Financial intelligence also plays a role in how to target the restrictions and ensuring that they can be enforced, according to the U.S. intelligence official.
Over the past three years, more than a dozen major banks have run afoul of U.S. sanctions rules. The most notable example is BNP Paribas, the large French bank that agreed in June to pay a record $8.97 billion in penalties for having conducted what the U.S. said were banned transactions involving Sudan, Iran and Cuba from 2004 to 2012.
The Treasury’s Office of Foreign Assets Control, which enforces U.S. sanctions regimes, has grown from an obscure wing of the Treasury bureaucracy to a key player in the administration’s foreign policy. About 6,000 individuals and entities are on the administration’s sanctions list of “specially designated nationals.”
There’s long been debate over the effectiveness of sanctions, though, particularly when it comes to coercing nations such as Russia, Cuba or North Korea. For starters, they require international cooperation, sometimes from reluctant partners such as China.
Using financial weapons carries dangers, too. “Risks of miscalculation and unintended consequences are high because use of these tools is new and Washington is learning how they work by trial and error,” says the Eurasia Group report.