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The Terrorist Financing Game
by Jeff Breinholt1
Book Reviewed
John Cassara, Hide & Seek: Intelligence, Law Enforcement and
the Stalled War on Terrorist Finance (Potomac Books Inc. 2006)
Are we winning the War on Terrorism? Examining the cottage industry that is "books written by terrorism experts," you would think not. Consider the dramatic increase in volume. Prior to 9/11, one could have fit all the books about international terrorism on a single bookcase shelf. Back then, it seemed, we did not have a terrorism problem. Today, entire sections at Borders and Barnes & Noble are devoted to the problem, and there is seemingly no end of authors eager to tell us the truth about the Islamic threat, and how the United States government somehow does not understand.
The true sign of the proliferation of terrorism punditry is the increasingly division of the field into sub-specialties. Mary Habeck's article in the inaugural issue of The American Interest attempted to take a snapshot of the current taxonomy of terrorism books.2 It's been less than a year since then, yet the field appears to have mutated and divided several more times.
We are starting to see number of books dealing with the relatively new national security field of "terrorist financing." This is to be expected. Terrorist financing - how terrorists obtain necessary funding for cell maintenance and operations - is an important aspect of the political violence, and a way of understanding how to disrupt it. This is why virtually every government agency involved in counterterrorism now has a dedicated terrorist financing component, and why the 9/11 Commission devoted a special monograph to it.
Within this field, there were a number of books dealing with terrorist financiers within the U.S. On of the first was Steve Emerson's Jihad in America, which probably remains the best, but it has been followed by several more, including books by Rita Katz, Daniel Pipes, and Paul Sperry.3 There have also been some book length surveys the financial infrastructure of terrorist groups, by such experts as Matthew Levitt, Rachel Ehrenfeld and Loretta Napoleoni.4
Up until now, there have not been many books by government insiders that seek to describe how the U.S. government is attacking terrorist financing. Starting with Robert Baer's See No Evil published shortly after 9/11, several former government counterterrorism agents have come out with memoirs.5 John Cassara's Hide and Seek might be considered the latest manifestation of this genre.6 Unlike those other books, Cassara's memoirs deal with the sub-specialty of terrorist financing.
Cassarra comes at the issue from a unique vantage point. He served for several years as both a CIA analyst and operative, before being unceremoniously dumped by the Agency after having the audacity to marry a foreign national.7 From there, after a bring stint painting houses and mowing lawns8 and a rejection by the FBI because he was not a lawyer or an accountant, Cassarra joined the Treasury Department, first as a Secret Service agent and then with the Customs Service. Along the way, he maintained his intelligence sensibilities, and learned things about how criminals raise and move their money that no one else in the government fully appreciated.
For the most part, Cassarra gets it right, although not always for the right reasons and sometimes without seeming to know it. For example, he credits the value of a task force structure to crime fighting, in which government personnel from a variety of different backgrounds and skills are brought together and, armed with the same pool of information, unleashed on a particular social problem like narcotics and terrorism.9 However, he does not take this format to the next step, extending the task force template to include the field of intelligence.
This is surprising since, unlike most cops, Cassara understands the intelligence discipline. His book contains a good description of what is referred to as the "intelligence cycle."10 It works like this: a government's intelligence assets are pointed at targets to absorb information. The resulting information is treated by analysts, placed into the proper form, and disseminated to intelligence consumers, who use it to make decisions to take or forgo some government action. The consumers are constantly tasking the collectors on the intelligence topics on which they want to see collection and analysis. The collectors, in turn, are constantly providing that intelligence to the consumers. The cycle repeats, and is never-ending.
How can this concept be applied to law enforcement, and the concept of a task force? The key is understanding the concept of "actionable intelligence." In the intelligence cycle, apart from the value of knowing things for knowledge sake, information is useless unless it is placed in a form that official operations can be initiated on its basis. The development and dissemination of actionable intelligence - information that can be relied on by appropriate officials to unleash a particular government action - is the Holy Grail of the intelligence cycle. Whether intelligence qualifies as "actionable" depends on the needs and the traditions of the particular consumers. For law enforcement, actionable intelligence is called "evidence:" information shoe-horned into a form that can be introduced and relied on in judicial proceedings. To be part of the intelligence cycle, however, law enforcement personnel need to understand the trade-off that must be considered in any decision to act on intelligence, and the costs of such actions to intelligence sources and methods. Unless they do, there will be a clash of cultures between intelligence collectors and law enforcement consumers. When this occurs, their communication inevitably dries up, intelligence collection continues without an end-game, and the law enforcement consumers do not receive valuable information.
This dichotomy between information and actionable intelligence underlies one of the problems with Cassara's evolving understanding of criminal money movement as his career took off. His expertise was vast and incredibly descriptive. However, he does not always offer much in the way of prescriptions - how to make this information he collected actionable. This tendency is exhibited in his book, which contains a number of charts that were obviously lifted from PowerPoint presentations he developed and gave over the years, like how gold is used to wash money through Dubai.11 In the absence of a clear prescription, the analysis looks like knowledge merely for knowledge sake. These presentations undoubtedly made Cassara annoying to his Treasury managers, who lacked his passion and base of knowledge and may have looked at his information as nice to know but not actionable. It might have been hard for them to figure out what he was proposing. For example, Cassara bemoans the fact that nothing was done in response to a presentation he gave on the global threat of alternative remittance systems in November 1999, where his final PowerPoint slide was entitled "Outlook" and contained a number of observations regarding the likely impact of changing immigration patterns and increase economic integration around the world.12 Another presentation he gave contained a slide with the words "Forward Thinking," in bold type face.13 These presentations may have been too esoteric or polemic for the audience, given Cassara's description of their limited attention spans, and insufficiently moored to a proposed action. We do not have to read to the end of the book to know what happened. It took 9/11 for the various government components got on the terrorist financing bandwagon.
How could it have been different? There could have been a conscious re-calibration of the message. It may have been better for people like Cassara to propose something specific, and to force senior officials to choose between yes and no. Cassarra and the few others who understood before 9/11 how terrorists and organized criminals could exploit the global financial structure might have recognized that the government has the ability to alter what constitutes actionable intelligence, by creating new remedies and forcing this intelligence into the decisionmaking on specific operations. For example, if intelligence shows that terrorists tend to act in a certain way, a government can unilaterally decide to disrupt those actions, even if they are several steps removed from a threatened terrorist attack. The creation of a new government tool carries with it criteria for when and how it can be unleashed by the appropriate officials. When this occurs, intelligence that plays into the criteria for using the tool suddenly qualifies actionable, whereas the same information - prior to the advent of the tool - would not have been met that standard. This may have been one way to get the attention of senior officials: put the information into the context of a specific proposal for some action, rather than describing the problem in glorious detail.
This re-calibration is the national security equivalent to the old baseball saying, "Hit 'em wear they ain't." Intelligence yields information about how terrorists and organized criminals operate. From there, remedies can be conjured which are designed to hit them where they can least afford it. These remedies are a boom for counterterrorism operators. It gives them something to fix on that is more concrete that the elusive goal of "disrupting terrorism." For the good guys, it is a beautiful thing.
In a sense, that is what the concept of money laundering offers to the problem of drug trafficking and organized crime. The crime of money laundering allows us to disrupt nefarious activity at a further remove, by extending criminal liability beyond the illegal activity itself to conduct designed to conceal it. This means that, in the war on drugs, law enforcement is able to target not only narcotics traffickers but the crooked accountants and lawyers who help the drug dealers. The Bank Secrecy Act (BSA), which Cassara correctly describes as exactly the sort of anti-money laundering regime we should be promoting in other countries, requires American financial institutions to report certain customer conduct to federal authorities. The type of people who have the most to fear from this reporting - the unscrupulous - have the most incentive to evade it through fraud. Recognizing how these people are likely to react to the BSA requirements, we criminalize the act of fraudulent evading BSA reports, thereby creating a new remedy. When this happens, information that was not relevant before suddenly qualifies as actionable. It can feed the criminal justice system.
This is the sort of thinking that undergirds the American approach to terrorist financing. Terrorist financing is to terrorism what money laundering is to drug trafficking. Whereas the BSA mandates the filing of reports that make drug dealers nervous, terrorist financing efforts rely on publicized lists of terrorist-affiliated individuals and entities, to whom it is illegal to provide money. This approach makes U.S.-based fundraising for Hamas, Hizballah and Al Qaida illegal as of a certain date, and forces terrorist fundraisers to conceal their subsequent activity through fraud. Thus, placing group on terrorism lists makes a wider range of financial intelligence actionable. Cassara is not as enthusiastic about the terrorist lists as he is with the BSA, describing the designation process as an example of intelligence being misused and complaining that asset freezing is really a minor remedy.14 Many people, including the 9/11 Commission, agree with him. Still, the terrorist lists are a valuable resource for law enforcement, and for the financial sector bound by the BSA. It gives them something to fix on when they are told that their new mission is to prevent terrorism.
For the most part, Cassara seems to get it. If there is a fault with his arguments, it is that he does not take his good observations to their ultimate conclusion. For example, he notes that many foreign financial schemes were designed not to conceal dirty money or terrorist plans, but rather to cheat the local tax authorities.15 This realization has immense implications for how we pursue crime and terrorism, which Cassarra does not fully pursue accept in passing. Why not direct tax experts at national security challenges?
Consider the field of counterintelligence. Countries like the United States that have an intelligence service and a military are required to devote resources to determine whether there are spies seeking to steal sensitive information. This is counterintelligence. Meanwhile, in the United States, we have made the decision to tax illegal income. That means most American criminals are also tax cheats, unless they make the rather remarkable decision to report illegal earnings on their tax returns. For a criminal, reporting illegal income means facing the dilemma of how to characterize the activity giving rise to the proceeds, since the IRS is entitled to know not only the amount of one's earnings but also its source. Accordingly, spies within the U.S. who are being paid by foreign powers to steal our secrets may have as much to worry about from the IRS as they do from our counterintelligence apparatus. After all, they need to conceal the source of their income, lest they have problems with the tax man. There are signs that this is true in other countries as well. In the field of terrorist financing, where there are people in the U.S. being paid to raise funds for international terrorist groups, the IRS investigators are well-placed to uncover secret terrorist operatives, since the determining the source of income is part of the IRS' mission. Why not turn them loose on the spies and the terrorist fundraisers in our midst? After all, the IRS is the sole federal regulator of American charities, a form on which terrorist groups have been known to rely. If the United States can get them for lying to the IRS, it will have disrupted the U.S.-based terrorist infrastructure.
In overlooking the value of the IRS as a counterterrorism asset, Cassara is not alone. His former agency, the Treasury Department, already houses the IRS, yet it has devoted the last few years trying to convince Congress to fund the reconstitution of its enforcement assets that were taken away from it with the creation of the Department of Homeland Security. Treasury might have spent as much attention to training and directing its tax fraud investigators at the problem of terrorist financing, rather than trying to invent and fund new assets and authorities.
Of all of the government entities described in Hide & Seek, it is the Treasury Department's Financial Enforcement Network, known as FinCEN, that comes in for the most criticism.16 FinCEN administers the BSA and receives BSA-required filings, which makes it an important component in countering money laundering and terrorist financing. Cassara's description of his years as a law enforcement detailee at FinCEN is even more caustic that his scorn as the CIA polygraphers who ruined his career as a spy years earlier. Envisioned as America's "financial intelligence unit" and held out as a model for what other countries should aspire to, FinCEN's failings results from its apparent refusal to think like an intelligence agency and search for consumers. As noted, actionable intelligence requires that the collectors develop products that are easily understandable by decisionmakers. Due to the lack of vision by its managers (who Cassara, unfortunately, does not identify by name), FinCEN is relegated to a database operator for information provided by regulated American financial institutions. Although the database is made available to American law enforcement. FinCEN has apparently refused to follow Cassara's advice and develop the ability to proactively exploit the massive amount of data it receives from banks, and to push its findings to those in the law enforcement community capable of making use of it. FinCEN does not push its intelligence. Instead, it waits for it to be pulled. Hopefully, this is changing.
The inability to understand the intelligence cycle and the important relationship between intelligence and law enforcement also undoubtedly contributed to the inability of the Treasury Department and, later, the Department of Homeland Security, to stop the FBI juggernaut when the battle to control over terrorist financing investigations became pitched, an event that Cassarra describes in passing near the end of his book.17
The Bureau has had an intelligence capability since J. Edgar Hoover convinced President Truman to let it run spies in Latin America. Today, in the face the proposals to create an American MI-5 like structure, the FBI remains in firmly control of intelligence-based domestic surveillance. After 9/11, when the FBI's primacy over terrorist financing investigations was threatened by a newly-created Customs Service entity known as Operation Green Quest, the FBI skillfully played the intelligence card, claiming that it needed to integrate its intelligence operations and the Foreign Intelligence Surveillance Act authorities, which had just been made more expedient by the USA PATRIOT Act. It exploited Customs Service's lack of interest in intelligence tools. In the Byzantine world of Washington, Treasury and DHS were ripe for the plucking. In the end, judging from some of the unattributed quotes in the media, those agencies seemed not to know what hit them. (Meanwhile, in a development that is not mentioned by Cassara, those Justice Department officials responsible for the FBI's conquest were given the top terrorist financing jobs at Treasury and DHS that were vacated during the battle.)
Cassara paints a picture in which this seemed inevitable. In counterterrorism, even the best law enforcement efforts will not succeed unless they incorporate the discipline of intelligence, and absorb the ethos of the spies. This is the big message from his book.
All in all, Cassara's book is a welcome addition to the growing literature of counterterrorism, especially where his observations are coupled with some of the other writings by such commentators as Richard Posner about the ideal information-sharing architecture for a domestic intelligence service.18 Cassara comes across as a remarkable sensitive person for a cop, which is a nice thing to see. For example, he describes his chagrin at the grinding poverty he saw in Washington D.C. while working as a Secret Service agent, and he displays compassion for the mentally unstable people he had to investigate for making threats on the President.19 He is correct is his description of the clash of cultures and perspective between U.S. intelligence and law enforcement. He has led an interesting life, and has kept his ears and eyes open. He cites one of his mentors for the statement that, in law enforcement, "Management protects management," and this is undoubtedly one of the reasons creative operations so rarely get approved, and may have contributed to the failings that led to 9/11.20 As the author of the first inside account of the American battle to take the financial system back from the criminals and terrorists looking to exploit it, Cassara should be commended. More importantly, his ideas should finally find a set of consumers willing to listen.
1) Deputy Chief, Counterterrorism Section, United States Department of Justice. The views expressed herein are the author's own and do not reflect those of his employer.
2) Mary Habeck, "Reading 9/11," THE AMERICAN INTEREST (Autumn 2005).
3) Steven Emerson, American Jihad: The Terrorists Living Among Us (Free Press 2003); Rita Katz, Terrorist Hunter : The Extraordinary Story of a Woman Who Went Undercover to Infiltrate the Radical Islamic Groups Operating in America (Ecco 2003); Daniel Pipes, Militant Islam Reaches America (W. W. Norton & Company, 2003) Paul Sperry, Infiltration : How Muslim Spies and Subversives have Penetrated Washington (Nelson Current 2005).
4) Matthew Levitt, Hamas: Politics, Charity, and Terrorism in the Service of Jihad (Yale University Press 2006); Rachel Ehrenfeld, Funding Evil: How Terrorism Is Financed--and How to Stop It (Bonus Books 2005); Loretta Napoleoni, Terror Incorporated : Tracing the Dollars Behind the Terror Networks (Seven Stories Press, 2005)
5) Robert Baer, See No Evil: The True Story of a Ground Soldier in the CIA's War on Terrorism (Three Rivers Press 2003); Rosemary Dew and Pat Pape, No Backup: A Female Agent's Life in the FBI (Carroll & Graf Publishers 2004); I.C. Smith, Inside : A Top G-Man Exposes Spies, Lies, and Bureaucratic Bungling in the FBI (Nelson Current 2004).
6) John Cassara, Hide & Seek: Intelligence, Law Enforcement and the Stalled War on Terrorist Financing (Potomac Books 2006).
18) Richard Posner, Preventing Surprise Attacks: Intelligence Reform in the Wake of 9/11 (Rowman & Littlefield Publishers, Inc. (2005)
19) Cassara, supra., at 34-36.