The Terrorist Financing Game: A Review of Government Insider John Cassara's New Book, Hide & Seek
By JEFF BREINHOLT
Terrorist financing is a relatively new field of national security -- addressing how terrorists obtain necessary funding for cell maintenance and operations. Such financing is an important aspect of the political violence, and may also provide 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.
John Cassara's new memoir Hide and Seek deals with terrorist financing from the perspective of a government insider familiar with the U.S.'s plan of attack.
Cassara served for several years as both a CIA analyst and operative, before being unceremoniously fired after having the audacity to marry a foreign national. Ultimately, Cassara 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.
For the most part, Cassara gets it right in his book -- although not always for the right reasons, and sometimes without seeming to know it.
The Task Force Template and the Intelligence Cycle
For example, Cassara understands 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. 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 discipline of intelligence. His book contains a good description of what is referred to as the "intelligence cycle." 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 neverending.
How can this concept be applied to law enforcement, and to the concept of a task force? The key is understanding the concept of "actionable intelligence." In the intelligence cycle, apart from the value of knowledge for its own sake, information is useless unless it is placed in a form such that official operations can be initiated based on it. Thus, 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 shoehorned 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 endgame, and the law enforcement consumers do not receive valuable information.
Descriptions in Need of Prescriptions
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 his book excels at description. However, he does not always offer much in the way of prescriptions -- how to make this information he collected actionable.
This point is illustrated by the charts included in the book, obviously borrowed from PowerPoint presentations he developed and gave over the years. They address subjects like how gold is used to wash money through Dubai - but do not take the next step of offering clear prescription as to how such information can be useful.
These presentations probably have made Cassara annoying to his Treasury managers, who were doubtless looked for prescriptions, not just descriptions. For instance, 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. However, his final PowerPoint slide - rather than making recommendations for action -- contained a number of observations regarding the likely impact of changing immigration patterns and increased economic integration around the world.
The Importance of Connecting Information to Specific Suggestions for Action
Of course, in the end, it took 9/11 for the various government components to get 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 (and I number myself among them) to propose something specific, and to force senior officials to choose between yes and no, rather than merely describing the problem in glorious detail.
Cassara 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 those criteria for using the tool suddenly qualifies as actionable, whereas the same information -- prior to the advent of the tool -- would not have been met that standard.
This re-calibration of the criteria for the use of the tool is the national security equivalent of the old baseball saying, "Hit 'em where 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.
Such remedies are a boon for counterterrorism operators: They give them something to get a fix on that is much more concrete that the elusive goal of "disrupting terrorism." For the good guys, it is a beautiful thing.
Criminalizing Evasive Actions and Failures to Comply with Reporting Requirements
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 also 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 thus criminalize the act of fraudulent evading BSA reports, thereby creating a new remedy. With this new crime created, information that was not relevant before suddenly qualifies as actionable. It can feed the criminal justice system.
Criminalizing the Provision of Money to Terrorists' Affiliates
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 a given group on terrorism lists makes a wider range of financial intelligence actionable.
Cassara is not as enthusiastic about the terrorist lists as he is about the BSA; indeed, he describes the designation process as an example of intelligence being misused, and complains that asset freezing is really a minor remedy. 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. Such lists give them something to fix on when they are told that their new mission is to prevent terrorism - once again providing a specific focus within the pursuit of a general goal.
Taking Cassara's Arguments Further: Using Tax Experts in National Security
For the most part, Cassara seems to get it when it comes to the issue of terrorism financing. If there is a fault with his arguments, it is that at times, he does not take his good observations to their ultimate conclusion.
For example, Cassara notes that many foreign financial schemes were designed not to conceal dirty money or terrorist plans, but rather to cheat the local tax authorities. This realization has immense implications for how we pursue crime and terrorism, which Cassara does not fully pursue, except 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 determining the source of income is part of the IRS's mission.
Why not turn the IRS, too, 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 charities that are financing terrorism for lying to the IRS, then 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 more profitably have spent as much attention to training its own tax fraud investigators to address the problem of terrorist financing, and directing them at that problem.
Criticisms of The Treasury Department's Financial Enforcement Network
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 from Cassara.
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 scornful account of 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 to which other countries should aspire, Cassara's FinCEN has severe failings - often resulting from its apparent refusal to think like an intelligence agency and search for consumers.
As noted above, actionable intelligence requires that the collectors develop products that are easily understandable by decisionmakers. Apparently due to the lack of vision by its managers (whom Cassara does not identify by name), FinCEN is relegated to being a database operator for information provided by regulated American financial institutions. Although the database is made available to American law enforcement, FinCEN 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 strongly advocate the aggressive use of its findings by the law enforcement community.
In short, Cassara's FinCEN does not "push" its intelligence on others. Instead, it waits for it to be "pulled." Hopefully, this is changing.
The Battle for Control Over Terrorist Financing Investigation: How the FBI Won
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 was pitched, an event that Cassara describes in passing near the end of his book.
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, the FBI's primacy over terrorist financing investigations was threatened by a newly-created Customs Service entity known as Operation Green Quest. In response, the FBI skillfully played the intelligence card, claiming that it needed to integrate its intelligence operations and the Foreign Intelligence Surveillance Act authorities, a task that had just been made more expedient by the USA PATRIOT Act.
The FBI exploited the 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 had 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 - the very jobs 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.
A Worthy Insider Contribution to the Terrorism Funding Discussion
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 -- in his book Preventing Surprise Attacks: Intelligence Reform in the Wake of 9/11 --about the ideal information-sharing architecture for a domestic intelligence service.
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.
In the end, I believe Cassara 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. This reality may also have contributed to the failings that led to 9/11.
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.