KILCULLEN and MILLS: What happens when you follow the money
'In an age of instant digital transactions, algorithms and apparently ubiquitous monitoring what is the history of recent international financial tracking efforts?'
News that British and American authorities are investigating the financial activities of the Gupta family have provided encouragement to South African activists that the end may be nigh for the state capture brigade.
‘Follow the money’, a phrase popularised by the film All The President's Men, suggests that the answers to corruption may be found by following a money trail to higher office. In the South African context, following the money is seen as a support for democracy, and its pillars of transparency, fiduciary responsibility and good governance. It presumes that someone, or some institution, will at the end of the process be held accountable.
But, in an age of instant digital transactions, algorithms and apparently ubiquitous monitoring what is the history of recent international financial tracking efforts?
Following the money has been tried, with limited success, as a strategy in countering ISIS in Iraq and elsewhere in the Middle East, and the Taliban in Afghanistan.
Task Force Shafafiyat (or Task Force ‘Transparency’), was established by General David Petraeus in Afghanistan in 2010 to combat corruption, and headed by then Brigadier General (and now President Trump’s National Security Adviser) HR McMaster. Although tippity tip top secret, Shafafiyat was alleged to have algorithmic capacity – the digital firepower – to follow all financial transactions in all global jurisdictions, at least to the institutions where they landed and to and from whom they were transmitted.
In Afghanistan following the money had some public success, notably in unearthing the process and politically-connected figures behind the $1 billion collapse of Kabul Bank. It was less successful in combating corruption within the Afghan government, not because it was hard to find such corruption, but because patronage networks with high-level top cover from then-President Hamid Karzai and members of his extended family proved hard to go after—and were protected by a high degree of political impunity.
Today the Taliban earns an estimated $400 million yearly, principally from drugs and, secondarily, from illegal mining, extortion and bribery. Its partner group, the Pakistan-based Haqqani network, exploits timber smuggling and gem trafficking as well as kidnapping for ransom, and both groups allegedly hold significant offshore assets in a cluster of countries in the Arabian Gulf, with investments in property and trading businesses, among others.
For its part, ISIS at one point looked more like a state-based funding model, making money from oil and gas, selling electricity to the Assad regime, taxing antiquities smugglers and—most astonishingly—making millions from the Iraqi and Syrian governments who continued paying employees within ISIS-controlled areas even though the group impounded much of this revenue. Today, with the loss of most of its oil income, and its impending territorial demise, ISIS makes around the same amount as the Taliban annually, mainly from smuggling and protection rackets. Both ISIS and the Taliban, and their leadership, are cited by the UN sanctions committee.
Even so, such terrorist organisations do not stand still in the face of external challenges.
They morph back into networks. They evolve in response to changes from outside, relying on their strengths, employing a network of cadres, bound by religion, tribe, religion and honour. Instead of moving money through telecommunications, they resort to pre-digital methods, specifically through hawala – meaning ‘trust’ – systems based on the trust of money brokers, specifically throughout the Middle East and East Africa, on Islamic lines. Essentially hawala enables money transfer without money movement. As organisations like ISIS revert to the networked format akin to ‘classical’ terrorist movements, new financial instruments, such as Bitcoin, might offer other means. Trade-based money-laundering, people trafficking and classic smuggling are also favourites of ISIS affiliates in parts of Africa.
Of course there are clear differences between going after rogue governments as opposed to terrorist movements. The former is unlikely, unless there are events linking them to the latter. The reasons for doing so (or not) relate not just to obtaining the necessary intelligence, or even the applicability of global laws, or of sovereignty, but an assessment of what might happen as a result.
For one, there can be fear that going after cash flows can undermine local systems of control, perhaps causing governments to fail, ‘friendly’ leaders to fall, upsetting a local ‘balance’ of control. For instance, too, closing down the movement of money can hurt the innocent who depend on remittances—this calculus, in fact, lay behind Baghdad’s decision to keep depositing salaries in the bank accounts of families in ISIS-controlled Mosul in 2014 and 2015.
Fundamentally, external actors cannot want to go after transgressors any more than domestic players do. There are related questions of jurisdiction. These matters can be elevated to global concern, through the UN for example, as happened with Al-Qaeda, Taliban and ISIS, or the Financial Action Task Force, but this still hinges on the willingness of local institutions and other actors to comply.
External action might also undermine local systems of parliamentary democracy and accountability, and be seen to do so. Conversely the only way ultimately of cutting off such financial networks and illicit actors is in strengthening domestic governance. Acting internationally against money flows cannot deal with reasons or indeed the motives for such illicit actions in the first instance. This relates to the health of local institutions and local attitudes. If politicians are not held accountable at home, why should they by those abroad?
‘Show me the money’ was the refrain made in Jerry McGuire. But there was another phrase used in that movie that sums up the need to ensure the domestic governance aspect to financial tracking: ‘Help me to help you’.
Dr Kilcullen is the author, most recently, of Blood Year: The Unravelling of Western Counter-Terrorism, and is an Associate of the Brenthurst Foundation; Dr Mills heads the Foundation.