Hide & Seek: Intelligence, Law Enforcement, and the Stalled War on Terrorist Finance – John A. Cassara
By Lars Lofgren
John A. Cassara, a former CIA Case Officer and Treasury Special Agent, delivers an autobiography of his career while providing policy prescriptions for more effectively curtailing terrorism finance. Most notably, Cassara illustrates the role of trade-based money laundering in moving funds throughout global criminal networks and the necessity of developing intelligence and enforcement tools to impede trade-based money laundering. As Cassara quickly explains, this book is not a source for professional peers but an overview of Cassara’s career and insight on terrorist finance for the layperson. In other words, Cassara has refrained from pursuing a great deal of depth in exchange for accessibility.
Cassara’s Take-Home Points:
- There is a four-step process to the intelligence cycle:  planning and direction,  intelligence collection,  processing the information, and  dissemination of the information to policy makers. Intelligence collection is the most difficult step for combating terrorist threats; the importance of reliable human intelligence cannot be overstated (7-9).
- The CIA has an overreliance on the polygraph. Often, the only candidates capable of passing the examination are those that lead very sheltered lives, the kind of people that cannot recruit sources of human intelligence in the back alleys of the world (26).
- Sometimes, the only reliable method of penetrating a criminal organization is through an undercover operation. Some countries forbid such operations in fear that they will incite criminal action or go rogue. The U.S. avoids these possibilities through various safeguards (41-42).
- Interagency cooperation and targeting the international movement of funds were critical aspects of combating the Mafia (61).
- Money is laundered in three stages: placing, layering, and integration. First, illicit funds must be placed into a financial institution. Second, the source of the funds is obscured through complicated transactions such as wiring funds through multiple accounts in multiple jurisdictions. Finally, the funds are made legitimate by investing in tangible goods such as property or a business (62-63).
- There are two major types of financial crime investigations, reactive and proactive. In reactive cases, the criminal investigator is assigned to the case after the crime has been committed. For proactive cases, investigators assess trends and patterns to intercept on-going criminal activity (64).
- To effectively counter money laundering, a country must only establish a financial intelligence institution after enacting anti-laundering law (67-68).
- U.S. intelligence agencies often demand intelligence from their foreign counterparts but do not readily reciprocate which alienates foreign intelligence services. Intelligence sharing must be mutual (69).
- Gold is an excellent tool for money laundering because it is a widely acceptable medium of exchange and it can act as a commodity or a de facto bearer instrument (72-73).
- Many trade networks are based on ethnic or family business ties. These are alternative remittance systems that are also known as parallel banking, underground banking, or informal value-transfer systems. These systems completely bypass Western financial reporting mechanisms and have been largely ignored by Western investigators (73).
- With a downsizing of the CIA’s Directorate of Operations, the agency relied more heavily on foreign liaison services for intelligence. Coupled with a lack of emphasis on promoting language ability, the United States has been at a disadvantage in collecting international intelligence (100).
- Under the Clinton Administration, an edict was adopted that forbid the Agency from recruiting or handling any source with a criminal record. Since the best sources of human intelligence are personally involved in criminal networks, the edict has significantly impaired the procurement of intelligence (103).
- Dubai is a central hub in illicit movement of goods, money, and people, particularly its Free Trade Zones (108-109).
- Even though money was specifically allotted for Customs’ investigations into illicit textile transshipments, the Department of Justice did not have the resources to follow through with prosecution and the investigations did not produce tangible results. Coordination between government departments cannot be ignored (118-119).
- While the State Department and CIA naturally attract people that are effective in international environments, other agencies such as Customs do not enjoy the same advantage. Agencies with a domestic focus tend to send incompetent agents abroad to get them out of the way, hampering international investigations significantly. More emphasis must be placed on sending the right agents overseas (124-125).
- In the late 1990’s, the Black Market Peso Exchange (BMPE) was the single largest money-laundering operation in the Western Hemisphere. BMPE involved drug cartels selling U.S. dollars at a discount to brokers in Columbia for clean pesos. The peso brokers would then use the funds to purchase trade goods (143).
- Hawala is an alternative remittance system used throughout the world. For example, a patron in New York City will approach a local hawaladar to send money to a family member in Pakistan. The hawaladar takes the money, contacts another hawaladar in Pakistan, and asks him to pay the family member out of pocket. Periodically, these hawaladars will settle their accounts through a wire transfer, trade goods, or other transaction. The majority of funds moved within the network are completely legitimate but there is no way to discern illicit funds within the network. Since this network functions completely on trust through tribal, clan, and family relationships, it is incredibly difficult for Western law enforcement to gain intelligence or pursue criminal networks through hawala (144-147).
- People use hawala for several reasons including a lack of convenient, inexpensive, reliable and transparent financial institutions within a given country. With widespread corruption and intimidating bank forms, many people revert to hawala for their banking needs (149-150).
- Western institutions largely ignore alternative remittance systems like hawala and do not attempt to acknowledge, regulate, or incorporate them into Western financial monitoring (155-157).
- While an employee of the Treasury Department ‘s Financial Crimes Enforcement Network (FinCEN), Cassara was tasked with reorganizing and improving FinCEN’s analytical division, the Official of Investigative Support (OIV), and identified four problems:  most of the work performed by the divisions was data retrieval and not analysis,  there was no proactive analysis,  investigative opportunities were frequently, if not always, missed, and  there were far too many high-ranking staff members and not enough analysts. Senior management prevented any of these problems from being addressed by Cassara (160-166).
- Financial intelligence was not developed to detect terrorist funding; it was designed to monitor the enormous profits from narcotics. Moreover, FinCEN failed to produce intelligence on September 11 because it did not have the proper data-mining tools, expertise, personnel, proactive infrastructure, or management systems (177).
- Even after September 11, FinCEN continued to pursue terrorist through the Bank Secrecy Act (BSA) data and did not accept the importance of the hawala network (177).
- The U.S. has been able to develop a three-pillar strategy in combating terrorist finance. First, training and technical assistance programs are provided internationally to build the financial intelligence capacity throughout the international community. Second, enforcement and intelligence agencies conduct operations against terrorist financing networks. Third, attempts to deter terrorist financing are implemented through publically naming, shaming, and blocking financing assets of suspected terrorists (188).
- For the first pillar, five broad categories of training would be provided for countries that were developing their anti-money laundering regimes from scratch:  the creation of anti-money laundering laws that adhere to global standards,  creating financial intelligence while regulating and supervising financial institutions,  the creation of a financial intelligence unit (FTU),  the adoption of enforcement tools, and  trade-based money laundering (191-193).
- Countermeasures against terrorist financing do not differ greatly from money laundering (191).
- Even though productive investigations are typically initiated in the field by an investigator, many countries, including the United States, have focused on pursing bureaucratic quick fixes to respond to money laundering and terrorist finance (194-195).
- A significant amount of funding for al-Qaeda originates in charities. Because there is a lack of transparency in the monetary channels between charities and al-Qaeda, the majority of the funding that reaches al-Qaeda occur without the knowledge of donors, staff, or even the charity itself (203-205).
- The Afghanistan Transit Trade Agreement (ATTA) is regularly abused by smugglers and money launderers, contributing to terrorist financing and serves as the foundation for an Afghan trade and money laundering cycle. Dubai plays a central role in this cycle while Pakistan and Iran serve as hubs for the network. Goods flow into Afghanistan while heroin flows out (215-217).
- Ineffective tax policy is a major contributor to the widespread misuse of ATTA and smuggling. Until extensive tax reform is undertaken, people will likely continue to use smuggling networks just to avoid the burdensome tax system (218).
- Pakistan has a long-standing offer to collect joint customs tariffs and prevent the abuse of the ATTA, but neither Pakistan nor Afghanistan can oppose regional warlords with vested interests in the smuggling cycle (221).
- The international community must regulate trade by monitoring imports and exports if it hopes to hamper money laundering and terrorist finance. To that end, Cassara proposes creating a trade transparency unit (TTU) that could collect and analyze suspect trade data. Since the tools and infrastructure for this are already in place, the costs of a TTU would be minimal (223-225).
- Cassara’s policy prescriptions include:  address trade-based money laundering through trade transparency,  reform the federal government personnel system by providing more flexibility for managers, pay flexibility, and rotating employees throughout departments and agencies,  establish managerial accountability boards to provide oversight of management,  reform or abandon FinCEN,  fully exploit BCA data that is vastly underutilized before adopting additional regulations,  encourage the military to also pursue intelligence on terrorist finance and money laundering,  task state and local law enforcement with intelligence gathering on terrorist finance,  emphasize enforcement of already established regulations,  reestablish the Interagency Coordination Group,  analyze the effectiveness of the Department of Homeland Security (DHS) and assess the impact that DHS has had on agencies,  fill tax loopholes, and  resolve the immigration problem (231-245).
Cassara may have deliberately chosen to avoid a great deal of depth in order to obtain broad accessibility but fails to succeed in either regard. Writing an engaging book is no small feat and Cassara simply does not have the skills to pull it off. The result is a book that lacks both information and engagement. Undoubtedly, Cassara has the background and insight to present a foundational book in the field of terrorist finance but his choice to write for the layperson has produced a book that is neither valuable for the layperson nor the professional.
Cassara’s book suffers from serious structural flaws. Instead of systematically discussing topics and pointedly critiquing U.S. agencies’ responses to terrorist finance. Cassara’s writing has a tendency to pursue numerous tangents and suffers from an inability to develop a cohesive argument throughout much of the book. It is evident that Cassara could easily devote an entire chapter to the topics of hawala, gold transfer, and trade based money laundering. Cassara also attempts to examine reasons for how intelligence failures led to September 11. Unfortunately, none of these discussions are given the depth or priority they disserve and are intermingled throughout the book. And as a result, the book falls far short of its potential. Given the subject matter and the numerous points Cassara attempts to make, a chronological structure does not best serve the interests of the book.
Likely as a result of Cassara’s unwillingness to pursue a degree of professional rigor within his writing, Cassara discusses several topics briefly and with unsubstantiated claims that greatly weaken his ethos.
For example, Cassara mentions the need to strictly enforce immigration laws as a policy prescription for successfully combating terrorist finance. He claims that the majority of the American people do not want amnesty programs or easier paths to citizenship. The only reason that Congress has not pursued tougher regulation is because of “big-business interests.” These claims by Cassara are not backed by evidence of any kind. A brief remark about the importance of immigration policy and how the current status quo is not sustainable within the United States would be understandable but Cassara employs shortsighted analysis without evidence to advocate for a particular interpretation of an extraordinarily complex topic. While most of the book seems to be the result of thorough analysis, trite arguments such as this only weaken Cassara’s more pertinent conclusions.
There are few arguments by Cassara that are fully developed and the reader must take the vast majority of his claims on good faith.
Cassara, John A. Hide & Seek: Intelligence, Law Enforcement, and the Stalled War on Terrorist Finance. Washington D.C.: Potomac Books, Inc., 2006.
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