One of the standard operating practices in criminal (and other) investigations is to “follow the money”. Of course that is generally easier said than done, especially if the trail goes “global”. The pre WWII a global financial network had largely been based in British and German commercial institutions; French and Spanish participation had trailed as those nation’s colonial revenues decreased. Similar but smaller financial firms had formed in the U.S. as wealth migrated there, largely to service private fortunes and business interests.
Fundamentally the pre-war network was very conservative, accessible to the wealthy, to well established and politically connected businesses and to national governments. Secrecy in transactions was generally driven by competitive concerns but there was always the issue individuals and companies wishing to avoid or minimize taxes and duties – or skirting trade sanctions of their governments. All the colonial powers had done business in nations were activities such as the drug trade were actually legal, earlier slavery had been a substantial business. Moving money from such dealings into circulation in nations with legal restrictions on such trade required financial creativity.
The established global network did have its shadow side, facilitated by tightly controlled Swiss banks. It was relatively stable and sufficient for standard international business, even for the escalating global arms sales and national financial transfers of the World War I and II era. Increasingly obfuscating the nature of certain funds transfers began to assume a political context, selling weapons or even raw materials and machinery to nations during a war in which your nation was neutral, or even a combatant was attractive financially by required serious efforts to make such deals “deniable”.
A new element began to be added to “shadow” financial dealings following WWII, first with the explosion of covert American overseas political activities (cash could be carried but still needed to be deposited and distributed in the target countries). Then with clandestine/surrogate military operations. Surrogate political operations were intended to be politically deniable but they often required lots of open market arms and materials purchases – along with a chain of money transfers to obscure the origins of the money and provide deniability. In Shadow Warfare we detail some of the first examples of the new covert operations shadow network by examining Roosevelt’s pre-War activities in China and the CIA’s post war activities in Burma and Thailand.
Of course actually moving the weapons and supplies required private companies, introducing private business people to the chain of shielded money transfers. And once the outbound supply and money chain was in place, certain individuals in the chain recognized the opportunity to use the new networks themselves – to shield funds from legal/ illegal arms sales and increasingly drug traffic. Sam Cummings comes to mind with the former, Paul Helliwell the latter. Among the bankers and lawyers involved in the new, shadow banking and shipping network there were those who realized that their services could be useful to a variety of individuals who needed to shield their transactions and accounts from both law enforcement and/or various governmental tax agencies. The global activities of lawyers and Washington insiders such as Tommy Concoran and Paul Helliwell illustrate how individuals used for specific and authorized American covert projects went on to utilize their contacts and networks to spread the benefits of front companies and new banking entities far beyond the CIA.
It was all business, they looked for friendly board members including those with interests who might use their institutions and add legitimacy – and name recognition. Then they looks for customers who wanted no visibility at all. And when the nature of their business creations became known to others who had an increasing need for international money laundering and obscured transaction trails – including first organized crime factions and then the growing drug and weapons trades – their business grew. Of course with lots of covert/deniable cash going into SE Asia and later Latin America, local military and government leaders were quick to replicate their own shadow financial linkages – Thailand and Taiwan were early adopters in a big way. It proved helpful for some of them to use experienced legal and financial consultants in establishing their own connections to the shadow network, no real surprise that Helliwell represented Thailand in its overseas activities.
These evolving shadow financial networks originated as a tool to support the exploding range of American covert activities overseas but some of the individuals that helped build it (both inside and outside the Agency…and moving in between) were perfectly willing to use it for their own agendas and personal profits. They were also perfectly willing to share it with selected members of the “establishment” who had proved supportive politically. That ranged from high end relationships with wealthy Americans (especially those with overseas business interests) to the level of the individual CIA officer such as Ted Shackley, Ed Wilson or even David Morales – who used his connections to as a tool to support his commodity trading and arms brokering deals after retirement.
The net result of all of this was what I would term the first generation of the shadow financial network, originating during the late 40’s, evolving and growing during the 50’s and 60’s along with America’s Cold War era overseas operations and existing as an independent entity/tool being used by a host of clients by the seventies and eighties. However, by that time expertise in such dealings was becoming available to a much broader range of users and individuals in the right place could virtually build their own – custom networks – as with Frank Nugan and the Nugan Hand bank, which evolved out of the Viet Nam era covert supply and drug return traffic or even the “enterprise” that Oliver North built to support the Contra effort. Of course the financial side of North’s network was fairly simple, basically he just kept dumping cash into willing albeit private Contra bank accounts (first from presidential discretionary accounts, then from foreign donors and finally from US weapons sales). The Contra leaders showed that they could use it for their own ends with no problems and happily made their own banking arrangements, with advice from friends in Miami with experience in drug money laundering. Of course they also proved most willing to take Cartel money in return for the use of the shipping fronts that North had created – and as in many other covert projects, Agency and non-agency, that was simply ignored collateral damage, secondary to keeping the mission going.
Then a strange thing began to happen under the first Bush Administration, essentially the U.S. increasingly turned from covert action to overt warfare, legally funded military assistance programs and huge foreign aid programs – no need for shadow financial networks when you are legally dumping gigantic amounts of money to contractors or into the accounts of foreign allies. In addition, a much more global economy had evolved by the 90’s and a host of non-traditional electronic instruments were emerging – capable of moving large amounts of money almost anonymously. Of course those families and institutions who were experienced with the shadow network continued to use what was in place for their own but as the US government had less need for shadow transactions, a new clientele was emerging.
That clientele would involve newcomers to the drug trade, ultimately adding human and antiquities trafficking to their business. It would also come to include the globally networked jihadi terror groups such as al Qaeda. This new clientele found the established shadow network less accessible, especially after the attacks of 9/11 and turned to the creation of what I would call today’s Deep or Dark Financial Network, comparable to what is known as the Dark WEB – but not just using the internet. It does use the anonymous segments of the web, were huge amounts of cash can be transferred in real time with simple cover activities such as on line gambling. But it also makes use of NGO’s, global charities and a host of legitimate and illegitimate support organizations – a few individuals infiltrated into the right jobs allow funds to be hidden in the groups regular business. Hawala networks perform the same function.
Counter terror czar Clarke summed it up well when he said that while the FBI understood the old shadow financial networks, and had become somewhat adept at tracing organized crime and drug cartel activities, as of 2000 it literally had no clue about the operation or monitoring of this newest shadow network. To a some extent this new network has driven the hope that metadata could be used to track its transactions, many of which occur in real time on the WEB, were records last only for hours or days at the most and all of which require access to private data from the corporations which host the transactions. While metadata and bulk data collection have become highly controversial in terms of privacy concerns, the clearly do represent a quest for counter terrorist and law enforcement to try and at least stay even with the new, highly sophisticated Dark financial networks. Following the money has always been hard, FBI RICO specialists would spend years collecting records and establishing transaction and transfer trails. In the 21’st Century, real time life on the global internet has increased such challenges exponentially.