Deep (or dark, your choice) money has once again come briefly into view, the subject of global news attention for at least a few days in the Panama Papers scandal. If you were away from the news for a time an internet search will give you the basics, this time the news is centered on the customers of a very low profile law firm in Central America – Mossack Fonseca. Mossack Fonseca specializes in the use of shell companies and blind trust accounts to effectively obscure the movement of money and to shield its ownership from those who don’t want their names associated with it. The firm uses the international banking services of firms such as Commerzbank, HSBC and Societe Generale. The banks themselves simply make their services available without too much concern other than effectively moving money from account to account and location to location.
Technically it’s all a process which had its roots in international banking during the two World Wars, when various corporations determined it would be profitable to conduct business with nations who were at war with their own governments – but wished to avoid governmental scrutiny or public outcry while in search of possible short term, highly profitable business opportunities. Those transactions set the stage for “financial deniability” in the twentieth century.
Following World War II, and during the early decades of the Cold War, a new form of deep money operations came into play, driven largely for the need provide “political deniability” for covert government operations. If you have Shadow Warfare, you find this phase of deep money described in detail in the chapter on “Evolution of a Covert Warfare Infrastructure” and further detailed in a following chapter, “Autonomous and Deniable”. We also discuss the roots of that practice, illustrated by the actions of President Roosevelt in covertly funding a program to provide both defensive and offensive air forces to China – with the intent of preemptively striking Japan.
The lesson to be learned from the early covert operations, especially those in SE Asia, is not only how deep money really works, but how quickly certain of the front and shell companies – and the banking infrastructure put in place to move money through them – were taken over by criminal elements. The lawyers who put the infrastructure in place proved aggressive in marketing its capabilities to a wide variety of customers, asking few questions along the way. Their Boards of Directors generally asked even fewer questions. Within a short period of time drug money from the Golden Triangle, skim money from Las Vegas and Havana and yet more drug money from New York, Florida and the Gulf states were flowing through the same deep conduits, sometimes even within the certain of the more autonomous shell companies the CIA was using for its own tasks. The CIA’s surrogates often became quite skilled at using the same deep money practices for their own profit. In fact, by time of the Contra activities, the CIA actually had to establish an “understanding” with the Justice Department to allow it to remain involved with Contra leaders who were doing drug business on the side – without reporting them to DEA as the CIA was obligated to do by law.
Today both the CIA and and operational units within joint counter terror task forces find themselves still facing the reality that the people they need to use/support in their mission are sometimes more than ready to make and engage in illegal activities on the side, once again turning to dark money transactions. It’s a fact of life, it comes with the territory and its naive to think you can do regime building or collect information on terror groups with their own darn money networks without occasionally enabling such transactions. On the other hand, it’s not nearly as stupid (a little attitude showing) as shipping tons of American cash into Iraq, loaded on pallets. It would be interesting to compare the amount of actual dollars lost to fraud in Iraq and Afghanistan to the dark money activities of the locals being supported in regime and nation building. Not likely to happen though.
Back to Panama Papers and today’s large scale deep/dark money trends. What appears most significant to me is not how Mossack Fonseca was gaming the financial system but rather that most of their customers appear to have been politically connected individuals using their services to shield questionable internal financial activities within their own nations (Mr. Putin and his friends come to the fore, as do individuals from China, Iceland, Syria). Some twenty-nine Forbes-listed billionaires have been named in Mossack Fonseca transactions. No doubt further investigation will uncover drug money and possibly even artifact money, the latter having become really big business following the massive archeological thievery in Iraq and Syria. But primarily its a matter of individuals with a lot of political reach and/or financial clout hiding their money making from their national media and, of course, from taxation.
So, with the end of the Cold War (well the first Cold War, let’s call it CWI for short) deep financial transactions are no longer primarily a tool for covert military and political operations. Now the American government just ships cash overseas to fund regime building and military missions. Nothing covert about that. Now the dark money techniques and infrastructures originally built to provide national deniability, quickly penetrated for use in shielding criminal activities, have now become largely devoted to simply protecting ultra-rich individuals and global corporations from paying taxes.
Putting it all in perspective, there seems to be something of a political message in all this. We used to follow the money to dig into the covert side of international relations. Now it seems that it’s become much more personal, that in itself suggests some interesting political implications. Almost as interesting as tracking the political contributions and potential legislative manipulation carried out by those same individuals and corporations. At the moment Supreme Court rulings have left us in a state where those investigations are much more challenging. But who knows, perhaps “anonymous” will turn their attention to the arena of campaign donations?
I also can’t fail to mention the irony in all this – that tools and techniques originally developed for government covert action are now being turned against governments world wide to seriously gut those government’s own tax collections.