INSIDE TRACCC Issue #1 – April 2013

Issue #1 – April 2013

1. Introduction
2. The Deadly Triad: An excerpt from Dr. Louise Shelley’s upcoming book on the “deadly triad” of crime, corruption and terrorism, and the illicit networks that link these three phenomena
3. Child Sexual Exploitation: An interview with César Alonso-Iriarte, Visiting Professor and Policy Fellow for the EU Institutions
4. Destructive Entrepreneurship: An interview with Dr. Zoltan Acs, Director, Center for Entrepreneur-ship and Public Policy, GMU School of Public Policy
5. The Myth of Martyrdom: Adam Lankford explained what motivates suicide bombers, rampage shooters, and other self-destructive killers in his recent talk at TraCCC
6. Following the Money: In her March 1st talk, Professor Celina Realuyo explored how to approach illicit financial activity and money laundering to combat crime and terrorism

 


1. Introduction

Today’s criminal networks operate across borders — both geographic and functional. Terrorist groups, human traffickers, counterfeiters, drug smugglers and cyber-criminals all operate in overlapping networks, many engaging in several forms of criminal activities.

Here at TraCCC we also work across borders to understand these networks of the 21st century and the non-traditional security challenges they present. In addition to TraCCC-affiliated faculty at the School of Public Policy, we collaborate with col-leagues throughout GMU who study issues of crime and corruption using a variety of different technologies, approaches and perspectives. We also work with visiting faculty,
practitioners, scholars and stu-dents from around the world.

The purpose of INSIDE TraCCC is to bring together these disparate disciplines and per-spectives, from the School of Engineering to the College of Humanities and Social Sciences. Each month we showcase the work being done by TraCCC-affiliated faculty and students, as well as those of other students and faculty throughout GMU who are working on issues related to transnational crime and corruption. Our hope is that this interaction will lead to deeper collaboration, new insights and an enriched understanding of these important issues for all of us.

If you are working in this field at GMU and are interested in being interviewed and having your work or your students’ work published, please contact Judy Deane at jdeane@gmu.edu.

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2. The Deadly Triad: An excerpt from Dr. Louise Shelley’s upcoming book on the “deadly triad” of crime, corruption and terrorism, and the illicit networks that link these three phenomena

In mid-January 2013, a coalition of diverse Jihadi groups seized control of the In Amenas gas field in Eastern Algeria, a field close to the Libyan border, which provides 5% of the gas produced in Algeria. The attack, blessed by a powerful Al Qaeda affiliate (Al Qaeda in the Mahgreb AQIM), revealed the power of radical Islamists to take control of a large and economically important site with over 800 employees. The attack is believed to have been planned by Mokhtar Belmokhtar who started a splinter group from AQIM not long before the attack.

These are the simple facts of the case. Yet this single act of terrorism epitomizes the interaction of crime, corruption and terrorism, both on security and the global economy. This attack is characteristic of contemporary security threats, where the challenge comes from non-state actors rather than governments. It struck at the core of the Algerian economy, yet had numerous foreign victims. It reveals the consequences of globalization, where foreign investment and workers are placed in ever more remote locales and unstable regions, especially as the world seeks to tap ever more distant sources of oil and gas.

The January attack of 2013 reflects a “new terrorism,” that is more spectacular in its operation and its victimization, but also more global. The hostages who were killed came from three continents—North America, Europe, and Asia. The attackers reportedly came from at least seven countries including Algeria, Chad, Egypt, Mali, Mauritania, Niger and Canada. The presence of two Canadians reveals the capacity of Islamic militant organizations to recruit not only regionally, but also globally. Yet the operation was even more global than was revealed by the na-tionalities of the terrorists and their victims. The In Amenas gas field was operated by companies based on four continents, including: BP, Statoil of Norway and Sonatrach (the Algerian national oil company), and serviced by many international firms. The Japanese engineering firm JGC Corp helped service the field. This helps explain why the Japanese, despite being far from their home country, suffered the largest number of fatalities.

Globalization has created a world where international businesses from diverse countries, employing citizens from many different countries, can combine in such a remote locale as In Amenas. But globalization has also created a world in which money, arms, and people move readily across borders. This operation required extensive advanced planning and logistics to move significant numbers of people and arms long distances across borders to this desert site.

Recent decades have seen a decline of borders, and greater efforts to promote trade and move massive amounts of goods. The decline of the border in the In Amenas case was a consequence of the absence of state function in Libya after the Arab Spring, and the ousting of Qaddafi. Many of the weapons came from the Qaddafi-era Libya and could be easily moved to diverse locales in Africa because of the absence of effective controls in the chaos that followed the “Arab Spring.”

Belmokhtar claimed credit for the assault, but in reality, it was carried out by a network that united a heterogeneous group behind a shared objective. Those who participated in and facilitated the assault included jihadists, ethnic rebels, and diverse criminal groups. This network construction is representative of the new face of terrorism that combines criminal and terrorist elements with unclear and often hybrid identities. Although the In Amenas attack was justified as a reprisal against the French attacks on AQIM in Mali, the advanced planning needed for the gas field attack negates this explanation.

The presence of crime-terror groups in the Sahel is not just a problem of safe havens in weak and loosely governed states. An important source of funding comes indirectly from Western firms, who buy expensive anti-kidnapping policies for their workers. Kidnappings of Canadians and Euro-peans in north and west Africa by insurgent groups, including AQIM, have provided massive funds for these groups, with payments that have totaled approximately $130 million dollars in the last decade by Britain, Germany, Italy, Spain, France, Austria, Sweden and the Netherlands. These resources have provided the insurgent and jihadi groups enormous capacity in an environment where labor and trafficked arms from Libya are cheap.

Kidnapping is not the only activity that has supported AQIM, although it may be its largest revenue source. Mokhtar Belmokhtar, the strategist behind the In Amenas attack, has been identified as a “jihadi gangster”, a special hybrid type associated with AQIM that combines terrorist objectives with significant illicit activity. He has also been referred to as “Mr. Marlboro” for his large role in the lucrative illicit cigarette trade in North Africa. But kidnapping and cigarettes are just part of this criminal panoply that also includes extortion, arms and drugs smuggling. The diversity of criminal activity that supports this jihadi activity in Africa reveals that drugs are not drugs are not the central funding source for terrorism, although they receive a disproportionate amount of attention in strategies that seek to address terrorist financing.

All of this illicit cross-border trade can only function because of large and pervasive corruption. The world map of corruption released by Transparency International for 2012 reveals high levels of perceived corruption in the Sahel-Sahara region as well as the adjoining regions of north, west, and central Africa. Libya, the source of the smuggled arms, is one of the most corrupt countries in the world. With this low level of state capacity, the political will is not present to control crime, terrorism, or their increasingly common hybrid structures.

The political and economic significance of this attack far surpasses that of previous terrorist acts in Algeria. The huge oil and gas industries are pillars of the Algerian economy, representing 98 per cent of its export revenue and 70 per cent of its national budget. Since Algeria is a major supplier of gas to Europe, the assault on this gas field challenges the security and dependability of gas needed by the European community for its daily life.

The events in a remote part of Algeria are not just Algeria’s problem. Nor are these problems just caused by actors in North Africa. The funding for terrorism, as well as the emphasis of outsiders on military solutions, rather than state-building, all contribute to the terrorism that occurred at In Amenas. Therefore, there is a shared complicity. Weak and corrupt states are powerless to stop the enrichment and support structures for the terrorist groups from abroad. Nor can they make the transition from authoritarianism to good governance on their own. The confluence of crime, corruption and terrorism is an outgrowth of policy failures in the political and economic arena.

The book will show that once a situation reaches such an acute level of crime, corruption and terrorism, it is very difficult to reverse the situation. From a policy perspective, the component elements of this deadly triad must be addressed before they reach such an acute and intractable level.

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3. Child Sexual Exploitation: An interview with César Alonso-Iriarte, Visiting Professor and Policy Fellow for the EU Institutions

Can you tell us a little bit about your back-ground?

CAI: I am a Spanish lawyer by training. After passing a competitive exam, I joined the Europe-an Commission in 1997, where I have been an official for 16 years. I am currently Principal Administrator at the Directorate General for Home Affairs. The European Commission allows – and even encourages – officials to move around in different branches of the administration. So I started my work in the field of education, and then moved to protection of personal data and privacy. A turning point came when I was invited by the U.S. State Department to take part in a program called the International Visitor Leadership Program, a pro-fessional exchange program between U.S. gov-ernment leaders and their foreign counterparts. One thing that really impressed me was the work being done by the State Department on fighting trafficking in persons. So when I came back, I asked to be transferred to that area, where I have been working for the last 5 years.

I then began to work in the fight against organized crime in different forms. I’ve been involved in the fight against human trafficking, child sexual exploitation, child pornography and cybercrime. One of the most important achievements in my work has been to help to get very comprehensive European legislation adopted on fighting child sexual abuse, exploitation and child pornography. I am very proud and confident that the work my colleagues and I have done on this legislation is going to make a difference.

Why did you choose to become affiliated with George Mason?

CAI: The programs that are taught here at the School of Public Policy are very topical and relate very well to my work at the EC and my research interests. I find that its faculty has a very interesting combination of academic and practitioners’ viewpoints. In this regard, GMU is unique, very much oriented to practical policy making and it draws from this varied background and expertise. It is located in the DC area, which gives opportunities to meet with decision-makers, government agencies, think tanks, NGOs and lobbyists. For me it is a perfect combination, so it was my first choice.

What course do you teach at SPP/GMU? What research are you doing here?

CAI: I am teaching a course on how the EU contributes to fight crime and terrorism. My hope is to enrich my students’ perspective by discussing how we make policy in practice, as a good complement to their academic curriculum.

My research concerns public-private cooperation in fighting Internet crimes. I am looking at existing experience in the U.S. and analyzing whether similar initiatives could work in the EU. So for example, I am meeting with the National Center for Missing and Exploited Children (NCMEC) in Alexandria, Microsoft, the National Intellectual Property Rights Coordination Center, and the Cyber Crimes Center in Fairfax, and I will be getting insights into their day-to-day activities, and the agreements governing their cooperation.

Tell me more about the research you are doing here. What are the underlying issues? Who is the intended audience?

CAI: The underlying issue is the use of the internet for committing crimes, whether as a tool or a target of the crime. The expansion of the internet and associated technology in our lives has led to a similar expansion in the number and variety of crimes that use the internet. The tricky thing with combating crimes on the internet as opposed to crimes committed offline is that with crimes in the real world we know, more or less, where they take place. So when they take place in physical space we have very clear rules on who should do what, that have been tested over centuries.

But these rules are unsatisfactory for handling crimes on the internet, for several reasons. The infrastructure of the internet is 90% private, so the border between the public and private spheres, and between fundamental rights and commercial issues, is blurred. People express their opinions on Facebook, which is a platform belonging to someone. You can have a police car patrolling a bad neighborhood street, but it is difficult to imaging police patrolling the internet.

Also, the internet goes through so many jurisdictions. In the offline world a crime occurs in one jurisdiction and there are clear rules about which authority has jurisdiction. On the internet it is not so clear, because the same act may occur over multiple jurisdictions. I may steal someone’s identity from my computer in Belgium, being a Spanish national, using a Yahoo account based in the U.S., and storing some information on a server in Australia. So this complicates things, and our current rules are not designed to handle these complications.

The rules we have in place for cooperation between governments are designed for major crimes, such as conspiracy or murder, that are serious enough to warrant concerted actions between governments, and are intrinsically slow, because they have checks and balances in place. But the internet facilitates many smaller crimes that are occurring across jurisdictions quickly and easily.

So we have lots of issues. Who pays for this cooperation? Are we outsourcing law enforce-ment to private industry? Are private companies becoming vigilantes? Is Microsoft or Facebook deciding what I can say or do instead of a judge? It is difficult to draw general lines or theories. We need to look at very specific arrangements, and it is very useful to study U.S. precedents. Many of the major internet players are American, and a lot of the infrastructure goes through the U.S. Since so many of the crimes committed on the internet technically fall under U.S. jurisdiction, these issues are higher on the political agenda in the U.S. than in other countries.

In the end, do you foresee the need for some sort of global standard for these rules?

CAI: I don’t know what the conclusions are going to be yet. But I am hoping that my research and experience here will help me find some things that are being done in the U.S. that we can adopt relatively easily in the EU, without needing major policy changes.

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4. Destructive Entrepreneurship: An interview with Dr. Zoltan Acs, Director, Center for Entrepreneur-ship and Public Policy, GMU School of Public Policy

How long have you been at GMU? What do you teach?
ZA: I came here six years ago. I teach entre-preneurship and economic development to graduate students. I direct the Center for Entrepreneurship and Public Policy.

Tell us a little about your career before GMU
ZA: I served in the government as Chief Economist at the Office of Advocacy of the U.S. Small Business Administration and Research Fellow at the U.S. Census Bureau. In academia I have been associated with a number of institutions, including the University of Maryland, University of Baltimore, University of Illinois/Springfield, Middlebury College and Columbia University. In Europe I helped to found the Max Planck Institute in Jena, Germany and have been associated with the Imperial College Business School in London, the University of Pecs in Hungary.

What got you interested in the subject of entrepreneurship?
ZA: As a graduate student in the 1970s/80s I did research on the hot topic of the day – inflation. I looked at the problems facing the steel industry, and discovered to my amazement that in many cases the big guys in the industry were being outcompeted by the mini-mills. That wasn’t supposed to happen because economies of scale were supposed to rule in the steel industry. This discovery got me interested in the phenomenon of entrepreneurship, and I have been looking at it ever since. It is complicated, like a big ball of yarn, and I just keep pulling at the thread to see
where it goes.

What is your main area of focus and why is it important?
ZA: Our Center for Entrepreneurship and Public Policy has developed the Global Entrepreneurship and Development Index (GEDI.) It measures productive entrepreneurship around the world. But not all entrepreneurship is productive, i.e., wealth-producing. There is also destructive entrepreneurship. I got interested in this subject a few years ago, when one of my PhD students, Samee Desai, wrote her dissertation on destructive entrepreneurship and its impact on conflict and post-conflict situations.

All entrepreneurs make money, but only pro-ductive entrepreneurs make the economy grow. When they get rich, society as a whole becomes better off. Destructive entrepreneurs get rich, but they make the overall pie smaller. You can see them on Wall Street, and you can see them on the streets in the ghetto. Then there are unproductive entrepreneurs, who neither create nor destroy value. They simply allocate to themselves wealth created by others. Finally there are underproductive entrepreneurs – those who create wealth, but do it very inefficiently. So there are lots of different
kinds of entrepreneurship.

How does your work fit in with TraCCC’s focus?
ZA: Everyone studies productive entrepre-neurship, at GMU and elsewhere. Yet our research suggests that only about 50% of entrepreneurship is productive. Very few people study destructive entrepreneurship. Louise Shelley is one of the few who does. So now we are looking at the possibility of a school-wide study on this subject. How do you transform destructive entrepreneurship into constructive entrepreneurship? It is a major policy issue. We can pretty much predict how many entrepreneurs there will be in the future, but how can we make more of them productive and less of
them destructive? That’s the big question.

What is your most recent work?
ZA: It is hot off the presses: Why Philanthropy Matters: How the Wealthy Give and What it Means to our Economic Well-being (Princeton University Press 2013.) I have been writing this book for 15 years. It’s not a new subject. It has been happening since 1600, but no one has paid any attention to it. My thesis is that the uniqueness of American-style capitalism is that it allows people to create wealth by being entrepreneurs, but then requires them to invest back into society through philanthropy. It is not a legal requirement, but it is culturally ingrained. This is what makes the model sustainable. It is the great untold story of American capitalism, and the question is whether other countries in other parts of the world will adopt this
aspect of our economic system.

What do you like best about GMU?
ZA: It is dynamic. This is one of the few institu-tions of higher education to has gone from being unknown to having a global reputation in 15
years, so it is not set in its ways.

Where do you see room for improvement?

ZA: In the same place. In the six years that I have been here, GMU has changed. It is maturing rapidly and it needs to retain its innocence if possible.

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5. The Myth of Martyrdom: Adam Lankford explained what motivates suicide bombers, rampage shooters, and other self-destructive killers in his recent talk at TraCCC

In the wake of recent suicide bombings and school shootings, the challenge of understanding the motivations of self-destructive criminals is a matter of public discussion. Notions of martyrdom, ideology, and commitment to a cause feature predominantly in analyses of these motivations, but Adam Lankford, an assistant professor of criminal justice at The University of Alabama, proposes a new approach to the problem.

Speaking on January 25th, as part of TraCCC’s Spring 2013 program of events, Professor
Lankford argued that many suicide terrorists and rampage shooters are “suicidal, in the clinical sense”, and that their desire to die may be independent of their beliefs in a given cause. He presented evidence from his recent book, The Myth of Martyrdom: What Really Drives Suicide Bombers, Rampage Shooters, and Other Self-Destructive Killers, that these individuals have a desire to kill and be killed (thereby attaining fame and glory), as well as a profound sense of victimization, often exacerbated by mental health problems.

Professor Lankford claimed that this evidence regarding the mental state of would-be martyrs “directly contradicts what most experts have insisted about suicide terrorists for decades”. A lively post-talk discussion with thirty or more representatives, from both Mason and the DC policy community, focused on the role of religious belief as a motivating factor, clinical definitions of ‘suicidal’, the recruitment of suicide bombers, and the practical consequences of Professor Lankford’s view for U.S. counter-terrorism efforts.

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6. Following the Money: In her March 1st talk, Professor Celina Realuyo explored how to approach illicit financial activity and money laundering to combat crime and terrorism

On March 1, 2013 TraCCC hosted a presentation by Celina B. Realuyo, Assistant Professor at the Center for Hemispheric Defense Studies of the National Defense University, entitled “Following the Money to Combat Terrorism and Crime: Case Studies on Mexico and Afghanistan.” The event was attended by more than ninety people, representing many different agencies and institutions.

Professor Realuyo’s presentation emphasized the role that globalization has played in linking previously localized criminal actors into global illicit networks. These illicit networks are taking advantage of new technologies to expand their scope, form new linkages and build global mar-kets. While narcotics remain the number one revenue-generator, other forms of crime including human trafficking, cyber-crime, financial crime and smuggling are growing even faster.

Professor Realuyo explained that there has been a convergence in the networks of terrorists and criminals, because terror networks, like every other organization, need funding, and many of them have lost the state funding that they previously enjoyed. Since these networks are now global, we can analyze them by looking at the four critical elements of global supply chain management: materiel, money, manpower and mechanisms. We need to understand how each group finances itself, what their vulnerabilities are, and how to cut them off. This is the basic rationale behind the strategy of following the money and leveraging financial intelligence to combat terrorism and crime.

The U.S. Counter-Terrorism Financing Strategy relies on three pillars: (1) military, law enforcement and intelligence operations; (2) public designations, sanctions and asset freezes; and (3) capacity building and international cooperation. Dr. Realuyo outlined five critical elements for the successful pursuit of criminal/terrorist networks: Political will, strong institutions, judicial mechanisms, resources, and performance mechanisms. Of these, political will is the most important, and often lacking.

There are traditional instruments for terrorist
financing and money laundering, such as brick and mortar banks, cash smuggling, trade-based money laundering (by over and under-invoicing) and alternate remittance services such as the Hawala networks. But new technologies have brought new forms of virtual money transfer, making money laundering easier. These include money transfers through the internet, through mobile phone networks and using widely available pre-paid cards. A Starbucks card, for instance, can be loaded with up to $10,000. Walmart recently noticed a large increase in people redeeming cards for cash, and recognized that they had become part of a major money transfer operation.

Professor Realuyo used two case studies – Mexico and Afghanistan, to illustrate the challenges of following the money trail.

In the Americas, illicit trade flows consist mainly of weapons and money flowing southward, while drugs and people are smuggled northward. The drug cartels are actively involved in human smuggling and trafficking. The rise in human trafficking is particularly shocking: The average age of women trafficked in the Western Hemisphere is now 13.

Several major cases of large scale money laundering from Mexico to the U.S. have been uncovered by law enforcement in recent years, but the penalties meted out have been very light. In March 2010 Wachovia settled a case that involved large scale laundering of drug profits from Mexico with a fine of $50 million and forfeiture of $110 million in profits. In June 2012 seven members On March 1, 2013 TraCCC hosted a presentation by Celina B. Realuyo, Assistant Professor at the Center for Hemispheric Defense Studies of the National Defense University, entitled “Following the Money to Combat Terrorism and Crime: Case Studies on Mexico and Afghanistan.” The event was attended by more than ninety people, representing many different agencies and institutions.

Professor Realuyo’s presentation emphasized the role that globalization has played in linking previously localized criminal actors into global illicit networks. These illicit networks are taking advantage of new technologies to expand their scope, form new linkages and build global markets. While narcotics remain the number one revenue-generator, other forms of crime including human trafficking, cyber-crime, financial crime and smuggling are growing even faster.

Professor Realuyo explained that there has been a convergence in the networks of terrorists and criminals, because terror networks, like every other organization, need funding, and many of them have lost the state funding that they previously enjoyed. Since these networks are now global, we can analyze them by looking at the four critical elements of global supply chain management: materiel, money, manpower and mechanisms. We need to understand how each group finances itself, what their vulnerabilities are, and how to cut them off. This is the basic rationale behind the strategy of following the money and leveraging financial intelligence to combat terrorism and crime.

The U.S. Counter-Terrorism Financing Strategy relies on three pillars: (1) military, law enforcement and intelligence operations; (2) public designations, sanctions and asset freezes; and (3) capacity building and international cooperation. Dr. Realuyo outlined five critical elements for the successful pursuit of criminal/terrorist networks: Political will, strong institutions, judicial mechanisms, resources, and performance mechanisms. Of these, political will is the most important, and often lacking.

There are traditional instruments for terrorist financing and money laundering, such as brick and mortar banks, cash smuggling, trade-based money laundering (by over and under-invoicing) and alternate remittance services such as the Hawala networks. But new technologies have brought new forms of virtual money transfer, making money laundering easier. These include money transfers through the internet, through mobile phone networks and using widely available pre-paid cards. A Starbucks card, for instance, can be loaded with up to $10,000. Walmart recently noticed a large increase in people redeeming cards for cash, and recognized that they had become part of a major money transfer operation.

Professor Realuyo used two case studies – Mexico and Afghanistan, to illustrate the challenges of following the money trail.

In the Americas, illicit trade flows consist mainly of weapons and money flowing southward, while drugs and people are smuggled northward. The drug cartels are actively involved in human smuggling and trafficking. The rise in human trafficking is particularly shocking: The average age of women trafficked in the Western Hemisphere is now 13.

Several major cases of large scale money laundering from Mexico to the U.S. have been uncovered by law enforcement in recent years, but the penalties meted out have been very light. In March 2010 Wachovia settled a case that involved large scale laundering of drug profits from Mexico with a fine of $50 million and forfeiture of $110 million in profits. In June 2012 seven members of the Zeta drug cartel were arrested in the U.S. for a money laundering operation that involved the purchase of more than 300 thoroughbred racing horses. The case is expected to go to trial this spring. In July 2012 a Senate report revealed that HSBC Bank’s Mexico Unit had laundered drug money by shipping $7-8 billion from its Mexico unit to its U.S. affiliate in 2007-8. As a result, HSBC was fined $1.9 billion, but no one was held accountable and the fine was clearly insufficient to act as a deterrent to others.

On a more hopeful note, however, a high profile labor union leader, Elba Esther Gordillo, was arrested in early March 2013 on charges of corruption and misappropriating union funds. Holding such a high level official accountable represents an important first step.

In Afghanistan, the road will be even longer. Although the government is beginning to make efforts in the direction of countering terrorist financing and money laundering, there have been no significant prosecutions to date. It will be important for Afghanistan to sign up to international norms such as the Financial Action Task Force (FATF). There is a shortage of resources – both human and technological – to pursue these issues, and there are also cultural issues. The concept of making an example, especially of high level officials, is not a popular one.

Following Professor Realuyo’s presentation there was a lively discussion focusing on the need for much larger fines for banks engaging in illegal activities; ways to better track ownership of real estate and new financial instruments; differences between the Hezbollah and Haqqani networks; and the importance of developing law enforcement and intelligence networks that cover the gamut of terrorism, drugs, crime and corruption,
rather than organizing each issue in separate silos.

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