Irregular Warfare Podcast - Money Talks: How Nonstate Armed Groups Finance their Operations and Organizations

Episode Date: July 15, 2022

How do terrorist organizations and other nonstate armed groups finance their activities? And just as importantly, how can the United States and its allies counter those streams of money? Those questions are the focus of this episode. Our guests are Dr. Margaret Sankey, research coordinator at Air University's Office of Sponsored Programs, and John Cassara, a twenty-six-year of various federal intelligence and law enforcement agencies whose career focused on anti–money laundering and terrorist financing. They address both of these overarching questions before offering insight on interagency cooperation and tracking the money pushed into combat zones or to partner forces.

It should not be a surprise for U.S. law enforcement and policymakers in general, because financial intelligence was set up to fight the war on drugs, where there was large amounts of dirty money sloshing around through Western financial institutions. It was not set up to fight the war on terror. They were going to fight the new war with weapons developed for the last war. The UN has lots of reports about how they have ended up renting buildings from bad guys. Their people will go to buy food or hire translators. And these are people who are paying tribute to bad guys. So there's already a kind of net that captures a lot of that coming in. How do you come in paying UN or US or NATO wages and not have that bleed out with these

huge waves that rock everybody's boats. Welcome to episode 57 of the Regular Warfare podcast. I'm your host, Laura Jones, and my co-host today is Shana Sennett. Today's episode focuses on how terrorist organizations and other non-state armed groups finance their activities, and how the United States and its allies can counter those streams of money. Our guests begin by framing the techniques, both legal and illicit, that armed groups use to fund their operations and organizations. They go on to explain the tools the United States uses to counter these financing methods and explore if those tools have been effective when applied to the war on terror.

They conclude by offering insight on interagency cooperation and tracking the money pushed into combat zones or to partner forces. Dr. Margaret Sankey is currently Air University's research coordinator in the Office of Sponsored Programs. She previously worked as a director of research and electives at Air War College. She earned her PhD from Auburn University and is the author of the book, Blood Money, How Criminals, Militias, Rebels, and Warlords Finance Violence, which forms the foundation of our conversation today. John Kassar has served for 26 years in various federal intelligence and law enforcement agencies to include the CIA and as a special agent for the Department of Treasury and Secret Service. His operational career focused on anti-money laundering and terrorist financing. Since

retirement, he lectures around the world on transnational crime issues and consults for governments and industry. He's the author of several books on threat finance. You are listening to the Irregular Warfare podcast, a joint production of the Princeton Empirical Studies of Conflict Project and the Modern War Institute at West Point, dedicated to bridging the gap between scholars and practitioners to support the community of irregular warfare professionals. Here's our conversation with Dr. Margaret Sankey and John Kassara. Dr. Margaret Sankey, John Kisara, thank you so much for being with your Regular Warfare podcast today. We're really excited to have you here today and expand our knowledge on threat finance and how it interplays with irregular warfare.

Thank you so much for having me on. It's been exciting to dig into this shady, illicit world, and I'm really interested in seeing what John has to say about this, too. Thank you, everybody. So, Margaret, we're going to start with you, just to kind of frame this conversation, and to please introduce us to the main themes of your book, Blood Money, and set the stage for why understanding how armed groups financing their activities is so important when it comes to regular warfare. financing their activities is so important when it comes to regular warfare. Well, so when I started this project, what I was finding was the most striking thing was how exponentially modern globalization sped up all the usual mechanisms for moving illicit support. So as an example, maybe in a best case scenario, you have a border crossing and a produce company hires totally legit logistics consultants to tell

them which entry lane is moving fastest on a Tuesday morning. And that's good business. Over on a hill, a cartel has somebody with binoculars relaying inspection patterns in parallel. That's also good business for them. In the worst case, you have things that are really completely entwined, that the pre-cleared shipping container on an ocean-going vessel is half full of RFID tag merchandise for a big box store, and the other half of it has precursor drug chemicals or pangolin scales or smuggled artwork or whatever illicit stuff is moving just as frictionless through the world economy. So on a fast-moving global scale, the most treasured norms of capitalist business,

buy low, sell high, is also available to illicit actors. Arbitrage is a big word for me. Taking something that's plentiful and legal to where it's rare and prohibited is the holy grail of making money. It is what you get MBAs to do. And it puts these transactions for really bad people, for bad purposes, not far off in a shady back alley, but it's in global north front yards. And it's deeply entwined with the institutions and mechanisms that we use every day and that we expect to deliver really low friction interactions. The most striking and important theme, though, that I discovered was that all the people

involved in these illicit transactions, whether it's someone processing coca in a ditch with kerosene or buying bootleg CDs at a flea market, they have what for them is a good reason to be participating in this. And so sitting here in my kitchen, thinking about crewing a Horn of Africa pirate speedboat for a couple packs of cigarettes and a possible share of the loot doesn't seem like a great job prospect. But to kind of borrow Kilcullen's accidental gorilla, that might be the best thing going wherever that guy happens to be. Understanding why the actors in an illicit financial chain do what they do is both the hardest part because

every one of these groups is a unique fingerprint of their resources, their skills, their risk tolerance, the priorities. But getting that offers you all kinds of cracks into that organization's DNA and lots of hooks to pull people out of that activity if they can be deterred or if their needs can be met in some other way. John, building on the themes that Margaret lays out in her research, could you situate for us why it's important to have this understanding of armed group financing activities in order for the U.S. government in particular to enact its counterterrorism policies and conduct irregular warfare from like a general sense? Well, from a general sense, I mean, there's an expression that's often used, without money, there's no terror.

I've heard another kind of a similar expression over the years that money is the critical ingredient for all terrorist activities and organizations. And I think that's been kind of a steep learning curve for the U.S. government, particularly the U.S. military, since 9-11. My background prior to 9-11, I did an awful lot of investigations for U.S. law enforcement as part of the Department of Treasury in the Middle East and primarily sub-Sahara Africa and elsewhere. And I learned, you know, back in the 90s about indigenous ways of doing business, earning money, transferring money, storing money, and value transfer. And when 9-11 happened, you know, I went over to the Pentagon, I went over to DIA and tried to, in effect, pound the table

saying, you've got to pay attention to what our adversaries are doing. And I didn't get much of a reception because I found it wasn't really part of the mission at the time. They really didn't get it. And then I speed up a few years. I was in Kabul in 2006 in Afghanistan, helping the Afghan government set up their financial intelligence unit. And when I was there, I went around the embassy, I talked to US troops and found that really nobody was doing anything regarding threat finance. I could give you many, many more examples of all this. And it was only years later when DEA was working with DOD and started setting up threat finance cells in Afghanistan and later on in the surge in Iraq, when they started to incorporate threat finance, did they start making some progress? And that's great. But as I said, it was a steep learning

curve and far too many years were wasted not examining these issues. curve, and far too many years were wasted not examining these issues. Margaret, when you think about the manner in which these different types of groups operate, is there something distinct when we specifically consider foreign armed groups as opposed to criminals and drug traffickers? Are there more similarities than there are differences? Well, I think the answer is going to be the disturbing one, and that's that all of these options are open to these groups. And if it's something that fits within their skill set and where they are, they'll use it. I mean, we've seen things like Hezbollah was running a cigarette tax scam and the money was being used to purchase things off the shelf and send them to Lebanon.

So things that are very mundane and very everyday can be purposed to generate large sums of money in the same sort of way that bigger operations can. It's going to be the call of a particular group, where they are, what sort of things are available to them, what sort of skill set their personnel have. It's kind of funny, when I teach this in a class, I have the majors look up some of the zip codes they've lived in and figure out if you were the bad guys and the majors love to be bad guys and figure out what sort of illicit activities would generate money in these areas. Is it a kidnapping? Is it burglaries of lake houses? Is it, you know, stuff that falls off a truck that you can resell? Is this area,

you know, really ripe for human trafficking? And these groups will pick and choose depending on what's going to be good for them. And Dr. Freeman at the Naval Postgraduate School has a really great sort of set of axes of this, that they're going to look at this scale and find things that generate a lot of money on a fairly short time scale with as little hassle as possible and as little risk as possible. And it could be insurance scams. It could be running up huge credit card bills to finance going to Syria as a foreign fighter because, you know, God help Citibank if they try to come after you while you're in a ditch somewhere. They're persistent, but good luck with that. Robbing tourists, any of these kind of things are on the table, depending on working with

what you've got and what you have. Well, I think what Margaret was saying at the end is spot on. I think more and more, kind of with the fall of the state sponsors of terrorism, we're getting into what I call self-funding of terrorist organizations. It could be kind of benign activities. For example, the trading of Somali charcoal to the Middle East has been exported from Somalia for decades. Now they're using this to raise money. It could be different things as far as illicit oil and fuel activities becoming a substantial source of terrorist financing.

It could be counterfeit goods, illicit tobacco, human trafficking, smuggling, all different kinds of things. In Europe, there's a lot of welfare fraud here in this country as well. All kinds of things that these smaller cells or lone wolves are using to finance their activities. So what we're finding is kind of a mesh more and more with law enforcement concerns. I can quote some prosecutors in Europe that they're saying to trying to get a handle on terror in Europe, they're looking more and more at the street level where they see this crime and then making that links to terror groups. Margaret, you discussed this in your work.

How would you conceptualize the cost-effective nature of not just the funding, but what they have to do now to transition from how easy it is to make this money to how much they actually need in order to orchestrate attacks or just to fund their organizations. Can you introduce us to that? Absolutely. It's a little bit deceptive. I was actually surprised when I started looking at what individual operations cost. And it's really morbid to think about this, but 9-11 was pretty cost-effective and cheap. It's on the high end of these kind of things.

You know, a car bomb or a small cell of people can do disproportionate damage. We have great records because of the Northern Irish peace process about just how damaging the bill can be for an asymmetric conflict. You know, for every pound that the IRA spent, they're forcing the British government to outlay many times that. But sort of the good news is that these groups, in order to be sustainable, have to generate a lot more money than these individual operations. invisible outlay. They have to pay for all sorts of other things if they're going to be a going concern. And even a lone wolf is getting information from somewhere, and that has to come from somewhere. And that all costs money if it's going to be effective. And so the hemorrhaging of money to pay the sustainment bill is where a lot of those hooks are. It's the paying the rent to a landlord who's figured out they can upcharge for secrecy. It's all the bribes. It's the motor pool. It's the having to,

as some groups have done, run a media outlet. They run glossy magazines. They are filming recruitment videos. They're having to hire specialist talent. One of my favorite angles on this is the extent to which these groups put up with bad behavior on the part of their accountants. Finding somebody who can do the books for you is so precious that you're willing to overlook something that runs counter to the group's ideology in order to keep them happy. So as all this money rolls out in huge waves, it has to come in from somewhere. So all of these independent cells, the group, wherever it happens to be based in a safe haven, has to be hustling all the time.

Because as John said, the gravy train of proxy sponsors who just write you giant checks largely dried up at the end of the Cold War. There are still some sugar daddies out there, dried up at the end of the Cold War. There are still some sugar daddies out there, but it's fewer and far between. And groups have had to branch out and put more and more of their time into this endless churn of getting and spending money. Just to follow up briefly what Margaret was saying on the cost of terror attacks, I think the audience might be interested that we don't know for certain, but 9-11 probably costs somewhere between $300,000 to $500,000. She said that's on the large scale, but most of the common impact, subsequent terror attacks from Bali to Baghdad to Boston to you name it, you know, the San Bernardino attacks, in the few thousands of dollars, $10,000, $12,000, $30,000. And think

of the damage that has been done in so many levels. But from a law enforcement perspective, again, it's extremely, extremely challenging to try to combat that because it really isn't that much money. Margaret, to continue down this line of thinking, how does new technology and its wide availability change the game of how armed groups finance their activities? Are things like cheap off-the-shelf drones, software available to download, things like secure messaging apps, do those look to make operations even more cost effective for these groups? Off-the-shelf stuff has always been really useful. In the late 90s, Florian Kresnicki was outfitting the Kosovo Liberation Army out of Army-Navy stores in

Brooklyn. You know, you can get to a 90% solution with commercial off-the-shelf stuff in a lot of cases. That's accelerated too. Just a couple days ago, I was looking at an FCC report about the way that groups are using personal radio services banned. Just the great walkie-talkies that you can get at the Bass Pro Shop are going to do a really good job at organizing a group on the ground. It's great to be a state and to have an industrial base and a lot of money and end-user licenses for things, but you can also go to a sporting goods store and get a pretty good quality drone. You can get things to equip for night vision. All of these technologies have lowered the barrier of entry. You can rent bot swarms. Somebody who is as

technologically mature as I am can do a lot of damage with a stolen credit card number. This is something that is very difficult to keep up with legally. It's very difficult to find and combat. And it's especially difficult to pull apart from people using it for permissible reasons. John, you've looked at this operationally for many years. Do these developments in both technology and tactics make it easier or harder to track these groups and get the information that you need? I mean, are they leaving enough of a trail now? It's a challenge. But honestly, I go back to

kind of the old fashioned ways that our adversaries use to move money, transfer value that are very, very challenging for the West in general. I think we need to do a much better job kind of putting aside our linear Western ways of thinking, particularly thinking about money and finance. I mean, we all grew up using cash, writing a check, going to an ATM machine, electronic payments of various sorts. And our adversaries, yeah, they're familiar with that, but they also use things that are indigenous with them that we don't normally think about. And I talk a lot in my investigations and in my writings about what I call trade-based money laundering, trade-based value transfer. Anybody that's been, for example, in the Middle East or

in Africa, Asia, Latin America, you see the proverbial import-export concerns. Most don't understand how you can use trade to send money. For example, moving money out by importing goods at overvalued prices or exporting goods at undervalued prices or moving money in by importing goods at undervalued prices or exporting the goods at overvalued prices. I mean, this is common sense, but we don't really stop to think about it. And it's something that happens all around the world every day. And once again, our traditional countermeasures are not set up to spot that.

And then we have, I call them underground financial systems like Huala that many of your listeners are familiar with, or the Chinese flying money systems that are historically and culturally set up to use this trade-based value transfer process. I mean, they've been doing this for hundreds in the case of China, well over a thousand years. Gold is another one that we don't normally think about here in the West, but in certain areas where our adversaries operate, gold is a medium of exchange. It's not only a commodity, it's a de facto bearer instrument and its forms can change very readily. And they do it and it's very, very difficult for us to follow those money and value trails.

So this is a ripe field. It's interesting. I think it's fascinating. But we have to do a little bit better job on understanding the way our adversaries use finance in ways that we do not. So, John, on that, how do we analyze this? It sounds very complex, like when you look at the interaction, particularly between the domestic indigenous and the more global systems. So how has the

government, for example, structured our way to analyze this in a rigorous way? The short answer is they haven't, not very effectively. Just to put things in context, go back 50 some years and Richard Nixon declared war on drugs. And in order to give U.S. law enforcement tools to fight that war on drugs, Congress started passing a series of laws, rules, and regulations collectively known as the Bank Secrecy Act. You'll hear it as the BSA or Financial Transparency Reporting Requirements or Financial Intelligence. It's all the same thing. And most of our listeners are familiar with that. You go into a bank, you deposit $10,000 or more or withdraw $10,000 or more, the bank's going to fill out a form. Now, there's about 150 data fields on that one form. And there's roughly

18 million of these currency transaction reports filed every year. You go in and out of the United States, you travel into Dulles or JFK, you ask you to fill out a form. Are you transporting $10,000 or more cash and monetary instrument? Suspicious activity reports, probably the most important form of financial intelligence today, started in 1996. Bankers like to think they're supposed to know your customer. So if they see you come in to their financial institution or even money service business, and you're doing something that's not usual for your customer profile, say, for example, you walk in, you bring in a duffel bag full of

cash, you deposit it, and two days later, you wire it out to Dubai. That probably doesn't fit your normal user profile. They're going to write a suspicious activity report. Collectively, this is all called financial intelligence. Now, why is this important for what we're talking about? Well, Margaret was talking about terrorist attacks. I mentioned some examples as well, how much 9-11 cost some of these other attacks. There wasn't one piece of financial intelligence filed on any of the 9-11 hijackers or any of these other terrorist attacks that we talked about, again, from Bali to Baghdad, not a one. But financial intelligence was set up to fight the war on drugs, where there was large amounts of dirty money sloshing around through Western

financial institutions. It was not set up to fight the war on terror when these terror incidents or operations or attacks, call them what you will, cost much lesser amounts of money. At the time of 9-11, bureaucracies being what they are, particularly United States Treasury, Department of Justice to a lesser extent, they were absolutely wedded to financial intelligence. They were going to fight the new war with weapons developed for the last war. They pounded the table. Financial intelligence is going to work. Financial intelligence is going to work.

And it really didn't, not to the extent that everybody suspected it would or wanted to. I'll go back again to, say, al-Qaeda and Osama bin Laden. It's a great quote by bin Laden. There was a journalist working for a Pakistani magazine, found bin Laden in the proverbial cave up in Afghanistan just a few weeks before U.S. and coalition forces went into Afghanistan. And they asked bin Laden a number of questions, including financing. And they said, aren't you afraid that the West is going to be able to identify, seize and freeze your assets like we actually did with some success after those 1998 al-Qaeda bombings of our embassies in Dar es Salaam and in Nairobi? And Bin Laden said, no.

I mean, I'm paraphrasing here, but he says, no, we're not concerned. Al-Qaeda is filled with modern, educated, young jihadists who are aware of the cracks in the Western financial systems as they are the lines of their own hands. And as a result, these countermeasures that we put out, it was completely ineffective. It didn't work. That's just so interesting because we think of if you're operating within the global financial system that you're easier to track, but what you lay out shows that there are just as many places to hide as there are to be followed. Yeah. I don't have a lot of experience with the U.S. military, but you hear the expression a lot, they keep fighting the last war. And I think in this particular case, it was US Treasury that was fighting the last war, the war on drugs. And it was like they were trying to fit a square

peg in a round hole to make it work for this new war, and it didn't work, and they should own up to it. I'd like to also just continue to pull that thread a little bit too, because if we're talking about financial intelligence kind of being very reliant on above board documentation on all these different data points that it would collect through paperwork, how then does the global financial system actually allow them and allow these organizations to have above board monetary holdings. How are they able to actually launder that money to then have legitimate holdings to where maybe there actually is above-board documentation now, but it's gone through so many shells that trying to connect it

back to a nefarious actor or an adversary or illicit means is very difficult. I can jump in here for a couple of things. And one of them is sometimes the banks are in on it. We've seen this in some really spectacular kind of settlements with Wells Fargo, that they're happy to take dirty money, whether it was during the drug war or being in corresponding relationships with banks in other parts of the world. Banks make profits, and there are decisions that have been made that allow this money to pass through them because the purpose of these institutions is to make money. And some of the things that I found in my research were just

staggering, that personal bankers are trying to get to know their customers, but not so much that they'd have to feel bad about it. They were filling out forms of, you know, this person who wants to deposit this huge amount of cash and put a bunch of diamonds in a safe deposit box is the son of a self-made bazillionaire from the Congo. Well, I wonder where that money came from. And there are institutions, whether they are in an offshoring situation or some very mainstream, very traditional financial services who are willing to overlook it. There are lots of methods that our adversaries use to hide their assets. And yes, terrorists, yes, criminal organizations, and also various other, quote-unquote, bad guys. One of the things that comes immediately to mind is the use of shell companies. We find these around the world, here in the United States as well.

I mean, a number of international organizations have said the United States is about the easiest place in the world to set up a shell company. You can say it's Delaware LLCs, and that's part of it. But just about every state in the union has some type of shell company that is easily set up at low cost and has little to no beneficial ownership information. And this is a real challenge for law enforcement to follow the money trails. And then you finally find out that it is hidden behind this straw shell company, and you cannot find out what entity is behind it. And then multiply that exponentially with these shell companies that are found literally all over the world, not just in the proverbial Swiss bank account or the

Caribbean, but literally around the world. And it's extremely difficult. So until and unless nation states get together and decide that they are going to truly enact some type of meaningful, beneficial ownership information, nothing is going to change. Could you both build on that? And I mean, is this the responsibility of individual countries or governments? To what extent is there productive collaboration or cooperation going on amongst international organizations or between governments? Well, so here's one of the other rubs of globalization. I hear a lot about the absolute critical function of the Westphalian state and national sovereignty, that a state should be able to set its laws, patrol its borders, all of this kind of good stuff, which

sounds really great until you have a state that has decided our big national generator of income is going to be selling diplomatic passports or doing offshore accounts. going to be selling diplomatic passports or doing offshore accounts. And so it's very difficult as another state to get them to stop. There have been some coordinated advances. As John said, there was a part of the Defense Authorization Act that got Delaware to agree to share information with law enforcement, not a public registry like some other countries have, but they will share with law enforcement. South Dakota, which was always fascinating as a center of really huge wealth and very easy trust, is not cooperating to that degree. In the same sort of way, Switzerland found it to be in their interest to cooperate, I think, starting with some of the

World War II era claims. But that just causes the money to move to a less cooperative jurisdiction. It's an arms race between some little islands in the South Pacific to be the most friendly to register trusts using Cyrillic or Chinese alphabets. It's almost impossible to get them to stop. So I like to kind of build off of that as well. So if we're talking about these islands in the South Pacific wanting to do business with, you know, Russia and China specifically, how does that play now as we shift towards this era of great power competition or strategic competition, however you want to name it?

And when we talk about superpower sponsors or regional power sponsors to proxies, are we anticipating a shift now again to these armed groups having outside sponsorship? So I would say yes, absolutely. And part of the problem in attempting to regulate this is that the U.S. as a strategic competitor also likes to use these tools. It's very difficult to shut off the tap when it's something that we would probably want to use ourselves. And so having these financial centers that are operating in this way is not going to go away. It's like squeezing the balloon. It'll simply find somewhere else. There have been a lot of discussions about kind of the devil you know. Is it better to have an

area where there are some controls, but not as many as we'd like, just so things aren't driven completely underground or somewhere that we don't know about? And things are going to go to that very traditional paperless end of things with the Hawalas, where if you'd like this to be within the circle of a bunch of Yemeni cousins who are going to notice any outsider and they keep all of their records in their heads, it could go that way. Or it could go to the unregulated next frontier of putting all of that money in video game loot. So it's an extremely frustrating, very, very agile, fast-moving kind of situation. Yeah, Margaret makes some excellent points. But getting back to your question, whether or not big powers may start funding some of these

groups again, kind of going back to the old model. I'm not sure whether or not they're going to have to. And I'll just use China as an example. China, through their Belt and Road Initiative, it's an economic juggernaut. I mean, it's a huge power. And they're going into these smaller countries, and they are just throwing all kinds of monies around. China and corruption are almost synonymous. They use corruption within China. They use corruption outside of China. They buy off people and they go in there and it's almost a new form of mercantilism or colonialism or call it whatever you will. So we've talked about the global financial market. We talked about how countries interact with each other and with these groups and how they can navigate that globally. I want to kind of focus on individual populations. So when you

have an organization that integrates into a local economy and then we come in and try to counter that, one thing we do is we just flush that area with cash, whether that's to finance our own partner or finance our activities or finance military operations against the actor. How does that influx of cash potentially destabilize that local economy and work against our objectives to destabilize the actor? to destabilize the actor. Well, this is something that I ran into when I started looking at how does this intersect with peacekeeping and stabilization operations. Almost any outside group that comes in is going to be able to, just as you said, swamp an area with cash. And so you're doing things like providing opportunities for these groups to capture a lot of that cash. Their people will go to buy food or hire translators. And these are people who are paying tribute to bad guys. So there's already a kind of net that captures a lot of that coming in.

But it also causes all sorts of problems that maybe the people who would be really useful in stabilization if they stayed in the job as the school teacher or the doctor or whoever goes to work for the incoming group as a driver or a translator, and they're not in the position that might have been really useful. And so it's really difficult to deal with how do you come in paying UN or US or NATO wages and not have that bleed out with these huge waves that rock everybody's boats in ways that bad guys are set up to take advantage of, to tap into it in ways that advantage them. Yeah, this influx of cash that you talked about, you could use Afghanistan and Iraq and some other areas in recent history as good examples,

just flooding cash at the provincial level and just distorting everything. I once had a conversation with a broker trader in the Middle East, and I was talking about many of the things we were talking about today, trade-based money laundering and value transfer and Hawal. He basically looks at me and he says, John, you're talking about money laundering, but that's what we do. Meaning that's their culture, their way of life. And I don't mean that in a pejorative sense. That's just the way they operate. So whether it be DOD going in and just flooding an area with cash or the intelligence community going in and flooding the area of cash for of that money and holding people accountable for the way that money has been dispersed. Because that's not part of their mission. Their mission is to disperse it and have a successful operation, but not to account for what goes on downstream. So as we move from these larger footprint environments to smaller footprint where there's still cash going in there, does that change how you think we'll be able to have oversight? Are we and we get a lot of good feelings and good compensation and things, but it's hard to get and retain the par expertise, especially for as many

units as you need, where you need them, to keep continuity, when there's such competition for these sorts of resources and skills. And so to simultaneously have a smaller footprint with less supervision of the money while trying to do it with an already very stretched infrastructure of monitoring, I think the results here are going to kind of be inevitable. I think a natural follow-on to that then would be when we move into an area, especially militarily, how do we balance efforts to disrupt the finances of an armed group with that group's position of prominence potentially as a backbone of the local economy and the potential for destabilizing effects on the local population? You know, specifically, I'm thinking of the counter-poppy campaign in Afghanistan as an example. That's a historical case study, greatest hits. example. That's a historical case study, greatest hits. Something that I saw over and over again is that frequently, and Peter Andreas has this wonderful quote from a guy he met in Serbia,

who said that the wars in post-Yugoslavia had been the best crash course in capitalism that he could have possibly asked for. And he emerged from this as a sort of Balkan business titan. And so he's now a founding father of a new economy. And sometimes these are folks who are going to continue on and be people that a new country or a regional organization has to deal with as if they are a regular business partner or a member of parliament or whatever they are. You also have situations where what they're doing is so obnoxious or so out of step with what is tolerable that they're removed. And the gamble is, will taking them out cause more instability and more chaos than leaving them in. And I don't know that we

get that right on a consistent basis. It's really intolerable to leave some of these guys in place, but the vacuum that's created can be even worse. And I'm fascinated watching to see what the government of Afghanistan's poppy policy is going to be. Because as we watch them sort of swing from it is a moral eyesore, we can't have it, which coincidentally drove up the price of the stocks they were sitting on, swinging to, oh, nothing else grows here and we have to have money. So I don't think they have a lot of good choices and I don't think the international community has a lot of great choices. Yeah, I agree with what Margaret's saying. If we go into a scenario like you described, again, learning our lessons from

Afghanistan, I think what we have to do is to give the local populace alternatives because the local people on the ground, they need to feed their families. We have to give them options. I know we tried to do that to some extent in Afghanistan. I'm not quite sure how successful we were in listening to their needs. And this goes back to, I think, a crying need to develop. We talked about financial intelligence. I think it's cultural intelligence. Have a much better understanding of what's going on at the ground level and what motivates the people that we're working with. As we think about overall implications for the U.S. government in particular, one thing that seems to stand out is the necessity for this more integrated interagency cooperation. How do you both suggest that the government improves this when it comes to dealing with armed group financing? Well, this is really difficult. You know, I sit at an institution where we have to think really hard about inculcating joint PME. How do

we learn to speak each other's languages and cooperate even within a military setting? Something that I picked up from thinking about this is that it's even much more difficult than that because these kinds of situations require not just interagency, sister service, engagement with whole of government. In a lot of ways, it's whole of everything. Some of the things that I saw in this were when the military needed to work very closely with art historians. Those were some real culture clashes in terms of, why do I need to listen to this guy? Boy, all these uniformed people are just really rigid, and they can't see why it would be important to do X or Y. And so we're asking people to,

in a lot of ways, swim upstream of the culture of their organization to get really important things done. And that's difficult to do, to see things from an entirely different discipline or organization's point of view, really broaden the scope of tools at your disposal. And we know that this works. There are some joint organizations, particularly about finance, but it's also difficult to seed turf. And that's just the structure of bureaucracy that develops in licit and illicit organizations. I mean, if it's any comfort at all, we know from seized documents that Al-Qaeda fought about exactly this kind of credit sharing and bureaucratic

meshing too. So it's not an easy answer and it requires us to be flexible, agile, open-minded thinkers, which I think is something that the irregular warfare community excels at. It's a challenge. I spent 26 years working in the intel law enforcement bureaucracies, and I'd like to be optimistic that things have changed a little bit. I'm not so sure that I am. optimistic that things have changed a little bit. I'm not so sure that I am. From a law enforcement perspective, you talk about the FBI. They are the 800-pound gorilla out there. They love to throw their weight around. They're very good at what they do as far as white-collar crime and catching

bank robbers. But the kinds of things that we're talking about here today, I'm not so sure. Same thing with DEA. They're very good about what they do, but they're single mission and it's narcotics. Regarding treasury, we don't even have treasury enforcement anymore. We have IRS that does taxes, but with the creation of DHS,

we don't have enforcement anymore. It means our legacy customs expertise is rapidly disappearing. When we talk about the trade know, the trade-based value transfers and the stuff that goes overseas and this type of thing. And when we put them together in a task force environment, we just have inherent conflicts. And they don't necessarily like talking about law enforcement, like or understand or appreciate the mission of the intel community and DOD. It's just really kind of trying to force things together. And then the reforms that did occur after 9-11, I don't think

really solved the problems of turf and stove piping of information and all this type of things. But where I am optimistic, we did something early on when I was at FinCEN back in the late 1990s. We had such a thing called the Interagency Coordination Group. We had senior people. I represented customs, but we had a representative from the FBI and the DEA and the ATF, the alphabet soup. We met together once a week to de-conflict and to share information. This was on a person-to-person

basis. We all knew how the game would play and we could pick up the phone and solve problems and pass information. And at that level, it did work. And we respected each other. We got along really, really well. I'd like to see more things like that. And on that, Margaret, from your perspective, based on your research, what do you recommend as implications for practitioners who are dealing with this on a day-to-day basis? Well, I'll echo something that John said earlier, and that's really genuinely making an attempt to see these things within the context that they occur, that something isn't corruption, it's the way things get done, and that for whatever reason on a local level, that something isn't corruption, it's the way things get done. And that for whatever reason

on a local level, that's been acceptable and efficient and within the parameters of how things function, even if it runs counter to your mission or what you want them to do. And it's going to be work to figure out why they do it and what's possible within that context. And there are a lot of academics, there are a lot of academics, there are a lot of subject matter experts who are happy to help you understand that. And John, you're absolutely right. The Border Patrol folks who let me fire the marijuana cannon, that was a lot of fun. If there is a border, someone's going to figure out how to get bales of stuff over it. I guarantee that. That was my lesson learned from that day in Arizona.

Margaret, last question for you on this. This topic is unique because it doesn't just affect those who are in the irregular warfare community. You've written about how it actually includes everyday Americans who wittingly or unwittingly have a role in the way these financing mechanisms work. So what would you say are the implications for everyday citizens? work. So what would you say are the implications for everyday citizens? Well, and this is where I tend to veer off into far too goody two-shoes sort of don't buy counterfeit stuff. But then I think about, man, I hate paying all of these subscription fees to how many streaming services I have. It would be awfully tempting to just get the thing that I want. I think we have to consider how easy it is for bad guys to get their hands on

money and to think about advocating for, voting for, going along with reasonable regulation and trying to get consumer solutions that don't actively play into the hands of bad guys. And this is a big thing to ask. I mean, I want to go to the store and buy avocados and make guacamole and not think about, do bad guys own the farm where this is coming from and how hard it is to check on that. But I can do things like, you know, listen when politicians talk about know your customer rules. I can discourage somebody from trying to hide money in their divorce by opening an account in the Cayman Islands. That's not cool. Making these kind of decisions

can go down to a really personal basis. And one of the pieces of research that I really love doing this was a Naval Postgraduate School thesis by a guy who is a law enforcement officer in the Twin Cities in Minnesota. And he was looking at why did these Somali kids get alienated and go off to fight as foreign fighters? And one of the key things was that law enforcement couldn't do it all. There were real limitations to what the cops in St. Paul could do without agitating the community. cops in St. Paul could do without agitating the community. What really deterred these kids was that their Minnesotan neighbors reached out a hand to them, made them feel good about going to school, made sure they had a warm coat, helped tutor them in English. If that's going to keep somebody from donating their money online to Al-Shabaab, then let's do that. Let's make choices that make the world a

little bit better where we can. Dr. Margaret Sankey, Mr. John Kacera, we're out of time, but thank you so much for being with us at the Regular Warfare podcast today. We greatly enjoyed this conversation. I think it's very enlightening to our audience to reframe concepts that touch a regular warfare that we may not think about every day. Thank you so much for having me. It's been a pleasure to talk to you and certainly to be in conversation with John, whose work was a big help, as is his expertise as a practitioner. Well, thank you, Margaret. And thank you, everybody. And most importantly, thank you and the audience for giving us the gift of your time.

And thank you for all that you do to keep us safe. And God bless everybody. Thank you again for joining us for episode 57 of the Irregular Warfare podcast. We release a new episode every two weeks. In our next episode, Laura and I discuss the book Spies, Lies, and Algorithms, the History and Future of American Intelligence with author Dr. Amy Ziegert and former Principal Deputy Director of National Intelligence, Sue Gordon. Following that, Laura and a newest member of our team, Jeff Fanef, will discuss the book, The Bin Laden Papers, with General David Petraeus,

and the book's author, Dr so you don't miss an episode. The podcast is a product of the Irregular Warfare Initiative. We are a team of volunteer practitioners and researchers dedicated to bridging the gap between scholars and practitioners to support the community of irregular warfare professionals. You can follow and engage with us on Facebook, Twitter, Instagram, YouTube, or LinkedIn. You can also subscribe to our monthly newsletter for access to our written content, upcoming community events, and other resources. Subscribe to our monthly newsletter for access to our written content, upcoming community events, and other resources. If you enjoyed today's episode, please leave a comment and a positive rating on Apple Podcasts or wherever you listen to the Irregular Warfare podcast. It really helps expose our podcast to new listeners and new perspectives. And one last note, what you hear in this episode are the views of the participants and do not represent those of Princeton, West Point, or any agency of the U.S. government.

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