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3291. Covert Foreign Money: Financial Loopholes Exploited by Authoritarians to Fund Political Interference in Democracies

Author:
Josh Rudolph and Thomas Morley
Publication Date:
08-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
In addition to more widely studied tools like cyberattacks and disinformation, authoritarian regimes such as Russia and China have spent more than $300 million interfering in democratic processes more than 100 times spanning 33 countries over the past decade. The frequency of these financial attacks has accelerated aggressively from two or three annually before 2014 to 15 to 30 in each year since 2016. We call this tool of foreign interference “malign finance,” defined as “the funding of foreign political parties, candidates, campaigns, well-connected elites, or politically influential groups, often through non-transparent structures designed to obfuscate ties to a nation state or its proxies.” A typical case involves a regime-connected operative funneling $1 million to a favored political party, although buying influence in a major national election costs more like $3 million to $15 million. Rather than start our analysis by focusing on any given policy area, we review open-source reporting in 16 languages to identify malign finance cases credibly attributed to foreign governments. Finding that approximately 83 percent of the activity was enabled by legal loopholes, we catalogue the resulting caseload into the seven most exploited policy gaps. Broader than just money flowing through straw donors, shell companies, non-profits, and other conduits, malign finance includes a range of support mechanisms innovated by authoritarian regimes to interfere in democracies, from intangible gifts to media assistance. As such, policy strategies to address these vulnerabilities are not limited to campaign finance reforms, but also include greater transparency requirements around media funding, corporate ownership, campaign contacts with foreign powers, and other issues. In addition to identifying loopholes, our case study informs the scope of our recommended policy solutions, which are meant close off channels for foreign financial interference without infringing upon the speech rights of domestic political spenders or jeopardizing bipartisan support. Each of our recommendations balances these trade-offs differently based on empirical, legal, political, and administrative considerations vetted in consultation with more than 90 current and former executive branch officials, Congressional staffers from both parties, constitutional law scholars, and civil society experts. This report is organized around each of the seven U.S. legal loopholes that need to be closed, starting with the most urgent priorities, plus an eighth chapter on the need for stronger governmental coordination.
Topic:
Authoritarianism, Democracy, Finance, Foreign Interference, and Dark Money
Political Geography:
Russia, China, Europe, and United States of America

3292. Iran’s Authoritarian Playbook: The Tactics, Doctrine, and Objectives behind Iran’s Influence Operations

Author:
Ariane Tabatabai
Publication Date:
09-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
According to a 2013 indictment by the U.S. Department of Justice, hackers backed by a foreign power gained access to the controls of the Bowman Avenue Dam, a small dam in the New York City suburb of Rye, New York. Cyberattacks on infrastructure have long been a concern in the United States: Russia has targeted the U.S. power grid and other critical infrastructure in the past—at times successfully.1 Hackers backed by the People’s Republic of China have targeted U.S. utilities companies.2 However, neither of these strategic adversaries was behind this bold foray into U.S. suburbia: the culprit, according to the indictment, was the Islamic Republic of Iran.3 Over the past decade, Iran has emerged as an important national security challenge for the United States. A novel part of the regime’s effort—facilitated by the advent of the information age and new technology—is its development of a playbook and toolkit designed to undermine the United States at home just as, in the eyes of Tehran, Washington does in Iran. This makes the current Iranian challenge more subtle and nuanced than has been the case for most of the Islamic Republic’s existence. Iran has gradually expanded its capabilities to compete against the United States for influence within the region, and it is now also taking this competition into the United States and even Europe. One hundred days before the 2020 U.S. elections, the Office of the Director of National Intelligence put a fine point on this threat when National Counterintelligence and Security Center Director William Evanina released a statement noting that, “at this time, we’re primarily concerned with China, Russia and Iran,” who are all looking to “use influence measures in social and traditional media in an effort to sway U.S. voters’ preferences and perspectives, to shift U.S. policies, to increase discord and to undermine confidence in our democratic process.”4 The statement characterized the Iranian threat as follows: “Iran seeks to undermine U.S. democratic institutions and divide the country in advance of the elections. Iran’s efforts center around online influence, such as spreading disinformation on social media and recirculating anti-U.S. content.”5 The Islamic Republic’s authoritarian toolkit is unlikely to become as sophisticated as that of China or Russia in the near-term. After all, Iran’s economy is in shambles, its capacity restrained, and the model of society and governance it tries to offer profoundly limited in its appeal. And even the flagship tool used by Iran to interfere in democracies, namely its online influence operations, continues to suffer from such basic shortcomings as misspelled names, the repeated use of the same tactics and techniques, and a lack of proper research into the target and familiarity with its behavior.6 However, a perceived existential threat posed by the United States, an inability to match the conventional capabilities of the United States and its allies, and a strong desire to compete with the same, have encouraged Iran to double down on efforts to develop a set of asymmetric tools allowing it to overcome its shortcomings. In this sense, Iran is not dissimilar to Russia. “Authoritarian learning” (including partnerships with both Beijing and Moscow) has likely helped Tehran to overcome challenges and to develop its toolkit quickly and effectively. The result is that Iran is becoming a significant authoritarian actor challenging democracy in the United States and Europe. Tehran’s influence operations span traditional and digital media. The regime has built a sprawling web of traditional media outlets, as well as networks of accounts on all major social media platforms (even as it bans and limits access to these websites at home), allowing it to reach millions of users abroad. The content Iran creates, distributes, and amplifies is multilingual and seeks to adapt to democracies’ social, cultural, and political contexts—with fairly mixed results. Among the objectives of Iran’s information manipulation efforts are sowing tensions in democracies, dividing democratic nations internally and from each other, and alleging hypocrisy in democratic states’ foreign policies, undermining democratization in Iran and elsewhere. Iranian hackers routinely target U.S. persons, academic institutions, companies, non-profit organizations, and government agencies and departments. And Iran’s illicit finance schemes are considerable; although, they are currently focused on sanctions evasion and support of information operations, rather than used as a standalone vector to undermine democracies. Some of these tools and the tactics used by Iran are similar to those employed by both Russia and China—and both Beijing and Moscow have lent Tehran a hand in developing some of its capabilities,7 particularly in the realm of information manipulation. Iranian, Russian, and Chinese state media and associated social media accounts echo and amplify each other’s messaging. But there are also some differences in how Tehran deploys these tactics. This is in part due to differences in the political culture and structure of the country, the Islamic Republic’s own ideology and worldview, and the country’s status in the international system. Another significant set of differences arises from Iran’s shortcomings vis-à-vis both its adversaries (including the United States) and its authoritarian partners in Russia and China. For example, Russia and China can leverage their vast nuclear arsenal and enormous economic weight, respectively, to compete directly with the United States. Iran is ill-equipped to compete with the United States in either of those domains and, as such, sees this set of tools and efforts to undermine democracy as a means to elevate its level of competition rather than an end in itself. Hence, Tehran’s toolkit is more limited than those of Beijing or Moscow, leading the Islamic Republic to be more deliberate and selective in the programs it develops and, perhaps, more forceful in how it deploys them. As a result, though Iran’s growing efforts to undermine democracy should not be ignored and should be addressed adequately, for now, the Islamic Republic remains a lesser threat than China and Russia. This report tries to make sense of these activities and provide a framework for understanding Iran’s intentions and capabilities. It provides one of the first comprehensive discussions of Iran’s authoritarian toolkit, doctrine, and objectives. It must be noted that unlike other key Iranian initiatives—such as its nuclear program, missile activities, support for non-state actors, and regional interventions—Iran’s authoritarian toolkit remains scarcely studied in the academic literature. Understanding Tehran’s objectives in undermining democracy and the means it leverages to do so is important for a few reasons. First, Iranian activities over the past few years have shown that the regime is increasingly active in this space. And as Iran’s objectives and the tools it employs are different from those of other key malign actors, understanding their strengths and weaknesses and developing specific responses to them is a worthy exercise. Second, authoritarians learn from each other, and observing the Iranian case allows us to better identify the trends and comprehend the ways in which less powerful malign actors (as opposed to Russia and China, for example) may engage in similar activities designed to undermine democracy.
Topic:
Authoritarianism, Elections, Cybersecurity, Foreign Interference, Cyberspace, and Influence
Political Geography:
Iran, Middle East, and Global Focus

3293. Prospects for European and U.S. Policy toward Iran

Author:
Ariane Tabatabai and Edgar P. Tam
Publication Date:
09-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
President Donald Trump’s views on Iran have centered on dismantling the landmark nuclear deal known as the Joint Comprehensive Plan of Action (JCPOA), which was agreed in 2015. He made it clear early on that he believed he could negotiate a better deal with Iran that would not compromise the interests of the United States as much and that would also address far more issues of concern to its partners in the Middle East. However, to date the Trump administration has not come any closer to achieving this goal. Instead, the United States and Iran have come close to war. Although European countries share objectives on Iran with the United States—for instance, limiting Iran’s ballistic-missile activities and seeking its return to compliance with its nuclear commitments under the JCPOA—they disagree strongly with President Trump’s approach to achieving these. His approach has made Washington the proverbial bull in a china shop for U.S allies in Europe, forcing them to put on hold long-desired objectives such as expanding economic ties with Iran and bringing it closer into a community of responsible stakeholders. Therefore, the result of the U.S. presidential election will have a significant impact on Europe’s relations with the United States when it comes to dealing with Iran. There are several ways in which a Trump reelection could affect Europe’s calculations. A second Trump administration that maintains a hard-line policy toward Iran would lead Europe to double down on encouraging Iran to negotiate by offering incentives as a demonstration of its good faith to Washington. Alternatively, no longer having to think about his reelection, Trump may pursue a less hard-line approach to secure negotiations, thus solidifying his presidential legacy. Germany and France in particular might seek additional leverage to temper and perhaps even counter Trump’s hard-line Iran policy to limit what they view as the damage caused by his administration. For its part, the United Kingdom may align more with the United States, causing a rupture in European unity. However, a “hybrid” scenario is most likely, in which Europe would continue its attempts to be perceived as independent while seeking a greater role in leading a quiet international effort to get Iran back in compliance with the JCPOA and at the negotiating table. If Joe Biden becomes president, he would return the United States to the JCPOA if Iran returned to compliance—which Europe also wants—while trying to negotiate additional commitments from Tehran on other areas of concern, such as missile testing and U.S. hostages. If this plan is complicated by the Trump administration’s pursuit of a unilateral sanctions snapback before it leaves office, however, a Biden administration may find itself facing a scenario in which there is no JCPOA to rejoin. This could be further complicated by a withdrawal by Iran from the Nuclear Nonproliferation Treaty, which it has threatened to do. Even if there is a change in U.S. administration, European countries would still have to overcome differences among themselves on many aspects of Iran policy. A post-Brexit Europe may see the United Kingdom more aligned with U.S. objectives than European ones and acting more as an occasional “+1” to a remaining E2 of France and Germany. European countries also disagree on how to approach Iran’s malign activities, such as terrorism—with Germany having outlawed all of Hezbollah’s activities while the United Kingdom, France, and other European countries distinguish between the organization’s ostensibly political arm and its militant wing. These intra-European divisions, despite the European Union trying to establish a united front, make it easier for Iran’s propaganda efforts to sow division among European countries and in the transatlantic relationship.
Topic:
Foreign Policy, Elections, and JCPOA
Political Geography:
Europe, Iran, and United States of America

3294. October Surprise: Simulating a Foreign Interference Crisis on the Eve of the 2020 Election

Author:
Nathan Kohlenberg
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
The United States, like many other democracies, faces concerted and sophisticated operations aimed at disrupting, delegitimizing, and in some cases altering the outcomes of its elections. While foreign interference operations are not bound by election cycles, elections constitute a unique window of increased vulnerability. To better understand how well U.S. institutions have adapted since the 2016 election, the Alliance for Securing Democracy conducted a table-top exercise to assess potential gaps in policies and practices by government, social media platforms, and campaigns. The exercise also considered the options, challenges, and trade-offs that politicians, policymakers, and corporate officers might face in the days leading up to the 2020 election. The exercise was conducted virtually in July 2020 with a bipartisan group of 14 experts representing senior government, political organizing, and technology industry leaders. The results were clear: information sharing stalled, lines of communication were lacking, and distrust was rampant. Parochial interests and the mitigation of personal and organizational risk often took priority over national interests. Meanwhile, many leaders struggled to gather the information they needed to commit to a course of action. Although a simulation can never capture the complexity of the systems and relationships it aims to approximate, this exercise underscores that there is work to be done to improve resilience in all three sectors analyzed: the U.S. government, professional politics, and the technology sector. Many shortcomings were immediately apparent to the experts who participated, while others became evident in the after-action analysis. Working with the participants and other experts on election interference, we have summarized in this report a number of lessons learned from the exercise in order to spotlight recent progress and remaining challenges. Our simulation strongly suggested that current policies and structures are insufficient to facilitate the cooperation between stakeholders that would be necessary to mitigate a sophisticated information operation targeting the election. In particular, our participants concluded that response mechanisms remained troublingly dependent on the personal integrity of decisionmakers in Washington and Silicon Valley, and current government and social media policies are insufficiently precise and unambiguous to provide clear guidance in many situations, especially as relate to privacy and First Amendment concerns. Nevertheless, the particular course of the exercise and approaches taken by the participants also shed light on what can be done to build greater responsiveness into the range of public and private institutions responsible for ensuring the integrity of our elections.
Topic:
National Security, Politics, Elections, and Foreign Interference
Political Geography:
United States of America

3295. Leaks, Lies, and Altered Tape: Russia’s Maturing Information Manipulation Playbook

Author:
Jessica Brandt and Amber Frankland
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
In 2016 the Russian government and its proxies interfered in the U.S. presidential election in a “sweeping and systematic” fashion. Thanks to multiple bipartisan investigations and the work of researchers and journalists, rich detail about that operation—and the tools Russia’s disinformation agents used to execute it—are available to the public. In 2020 Americans are again preparing to elect a president. As the U.S. intelligence community assessed, and FBI Director Christopher Wray confirmed in recent testimony before Congress, Russia is conducting a “very active” interference campaign. Since 2016, Russia’s interference activity in the United States, and elsewhere around the world, has not abated. That’s because elections are a flashpoint for Russian information operations, but not the start or endpoint of this activity, which targets a broad range of polarizing or contentious political events. Over the past four years, the tactics, techniques, and procedures (TTPs) the Russian government and its proxies use to manipulate information and carry out deceptive campaigns have matured. These include: Co-opting authentic domestic voices and institutions, often by co-locating trolls within a target population, renting social media accounts of local actors, entrapping local leaders in “interviews” with purported journalists, recruiting real activists to foment protests, or mimicking or appropriating the names of local groups; Exploiting the anticipation of manipulation to claim that manipulation has occurred, often through false flag operations, or the amplification of homegrown conspiracy theories; Practicing tailored influence, by working through micro-influencers and in closed groups; Exploiting the full information ecosystem to launder a narrative, by seeding it with authentic domestic actors, deploying quasi-transparent Russian-supported media properties, and exploiting data voids. Broadly speaking, we are witnessing a marked shift toward harder to detect, more targeted information operations that cover greater swaths of the information ecosystem, likely carried out by Russian military intelligence. That is a very different challenge than the one policymakers faced in 2016, when the threat was not yet fully comprehended, and in 2018, when the threat appeared to be largely driven by Internet Research Agency (IRA) trolls. While it is important to glean lessons from those experiences, it is also important that policymakers not overlearn them, and in doing so, miss the consequential changes to Russia’s information manipulation strategy that are now underway. These changes are occurring partly to evade increasingly sophisticated detection capabilities and policies on the part of social media platforms. But they are also occurring for a more fundamental reason: the Russian government and its proxies do not need to rely on large quantities of troll farm content to upend U.S. domestic politics with corrosive narratives that undermine trust in democratic institutions and belief in the existence of truth itself. The fire is already raging—it needs only a nudge here or there to be redirected to good effect. This paper is not meant to be a taxonomy of Russian TTPs generally, but to highlight evolving trends with relevance to policymakers. It is an effort to help stakeholders of all types—journalists, regulators, and researchers—look beyond individual campaigns to see the full picture of Russian activity as it is changing and to anticipate what might be to come.
Topic:
Elections, Disinformation, Foreign Interference, and Leaks
Political Geography:
Russia and Eurasia

3296. A Future Internet for Democracies: Contesting China’s Push for Dominance in 5G, 6G, and the Internet of Everything

Author:
Lindsay Gorman
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
The United States and its democratic allies are engaged in a contest for the soul of the Future Internet. Conceived as a beacon of free expression with the power to tear down communication barriers across free and unfree societies alike, the Internet today faces significant challenges to its status as the world’s ultimate connector. In creating connectivity and space for democratic speech, it has also enabled new means of authoritarian control and the suppression of human rights through censorship and surveillance. As tensions between democracies and the People’s Republic of China (PRC) heat up over Internet technologies, the prospect of a dichotomous Internet comes more sharply into focus: a democratic Internet where information flows freely and an authoritarian Internet where it is tightly controlled—separated not by an Iron Curtain, but a Silicon one. The Future Internet is deeply enmeshed in the dawning information contest between autocracies and democracies. It is the base layer—the foundation—on which communication takes place and the entry point into narrative and societal influence. How the next generation of Internet technologies are created, defined, governed, and ultimately used will have an outsized impact on this information contest—and the larger geopolitical contest—between democracy and authoritarianism. China’s growing presence in the global telecommunications market—and the threat that reality poses to the United States and its allies—has catalyzed both national security and economic policy interest in fifth-generation cellular network infrastructure (5G). Like 2G, 3G, and 4G before it, the next generation of mobile connectivity promises a step-change in Internet capability and a societal transformation—through the explosion of connected devices across cities, vehicles, factories, and homes. The nascent data-fueled economy 5G Internet will spawn represents a new playing field for nation-state competition in both commercial innovation and systems of governance alike. In this new economy, United States leadership is not assured. China has made a targeted push to lead the world in the emerging technologies of the future—built on future networks and extending to the applications their data will enable: from artificial intelligence (AI) and autonomous cars to smart grids and advanced manufacturing. Chinese telecommunications giant Huawei has by some measures provided the most technical contributions to the 5G standard and last year filed more patents in Europe than any other company. Heavy state subsidies provided by the Chinese Communist Party (CCP) have increased the competitiveness of Chinese firms in critical technology industries abroad. As the Pentagon’s Innovation Board bluntly put it: “The country that owns 5G will own many of these innovations and set the standards for the rest of the world … That country is currently not likely to be the United States.”
Topic:
Science and Technology, Democracy, Internet, and 5G
Political Geography:
China and Asia

3297. Linking Values and Strategy: How Democracies Can Offset Autocratic Advances

Author:
Jessica Brandt, Zack Cooper, Bradley Hanlon, and Laura Rosenberger
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
The United States and other liberal democracies face a persistent asymmetric threat from authoritarian challengers who aim to reshape the global order in their favor. Illiberal regimes use a wide range of tools across the political, economic, technological, and information domains to undermine democratic institutions and alliances, prevent criticism of their own regimes and governance systems, and establish norms and standards favorable to autocratic rule. In the case of digital information technology, these efforts go beyond shaping norms to controlling the infrastructure that transmits information itself. To date, democracies have been slow to adapt to this contest, allowing autocrats to seize the initiative by taking advantage of the openness of liberal systems. Fortunately, the United States can regain the initiative in this emerging competition with authoritarianism—if it addresses its vulnerabilities, leverages its strategic advantages, and reframes the contest on its own terms. The United States faces an array of domestic challenges—political polarization, inequality and racism, erosion of traditional media, a growing tech-government divide, flawed and porous political influence systems, and impaired economic competitiveness—that threaten to undermine the United States’ competitive strengths. Autocrats can leverage these cleavages and constraints in the short-term, but in the long-term democratic characteristics confer tremendous strategic advantages. The United States’ advantages include a vibrant civil society, dynamic and competitive economy, innovative private sector, and robust network of alliances. Leveraging these strengths requires a national strategy to offset autocratic advances by seizing on the advantages of open systems, building resilience into democratic institutions, and exploiting the brittleness of authoritarian regimes. This Task Force report outlines the logic and contours of such a national strategy across four overlapping non-military domains.
Topic:
Foreign Policy, National Security, Authoritarianism, and Democracy
Political Geography:
North America, Global Focus, and United States of America

3298. 5G Security: The New Energy Security

Author:
Kristine Berzina
Publication Date:
11-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
Europe is on the cusp of a crucial technological and political transformation. This year, most EU member states will need to finalize plans for building 5G networks, which will overhaul the way their economies function. Only a handful of companies around the globe can provide the equipment needed for a 5G system—China’s Huawei and Europe’s Ericsson and Nokia are leaders. Europe’s telecommunications operators have focused on economic questions such as cost and timing in selecting suppliers, but strategic and geopolitical concerns are no less important, as are the concerns of Europe’s allies. The United States has banned Huawei from much of its infrastructure over security concerns, and in July, the United Kingdom reversed course and banned the installation of new Huawei parts from its 5G networks starting in 2021 and requiring the removal of existing equipment by 2027. The EU’s member states are in the process of making critical decisions of their own, and the stakes are high. Europe is at risk of locking itself into new technological and strategic dependencies with an authoritarian state: China. Europe has deep and painful experience with dependence on an authoritarian superpower, just in a different sector and with a different power. The commodity in question is old-fashioned natural gas, and the country is Russia. Western European countries entered into long-term energy ties with Russia through the construction of natural gas pipelines in the 1970s over vehement objections by successive U.S. administrations.1 To this day, Russia is the largest supplier of natural gas to Europe,2 and the decision to power European industry on Russian gas continues to eat away at European and transatlantic solidarity. Germany’s ongoing support for Russian natural gas projects, such as the Nord Stream pipelines, ignores the energy security worries of Germany’s EU neighbors3 and is subjecting European companies to U.S. sanctions.4 Over the past several decades, the natural gas relationship between Russia and Germany, in particular, has grown into a vector for Russia’s influence in Europe’s strongest economy. Former German Chancellor Gerhard Schroeder became the chairman of the board of the first Nord Stream pipeline, which was conceived of during his chancellorship, and then drew further financial benefits from the Russian energy sector in his roles as chairman of the Nord Stream 2 pipeline and of Rosneft, Russia’s massive state-owned oil company.5 Having a former head of government accept money from Russian state-owned companies, and then advocate in favor of government policies friendly to Russia, is an example of how the economic relationship with Russia can corrupt and coopt the political establishment. It has taken the European Union nearly four decades and significant funds to put in place a regulatory framework and infrastructure that offset the energy security risks inherent in the reliance on Russia’s natural gas. Critical capabilities now in place include the ability to pump gas from west to east, EU oversight of member states’ bilateral natural gas supply contracts with Russia, and the unbundling of monolithic companies to allow for greater competition and third-party access to major infrastructure.6 And the system is still imperfect. While it is unlikely that EU citizens will be left freezing in January because of a natural gas supply cut-off, the distrust that pipelines foment between EU member states continues to poison European ties. Moreover, getting here required various worst-case scenarios to occur—supply disruptions and Russian military aggression on the European continent—before the EU took significant action. In 2006 and 2009, Russia cut off natural gas supplies because of disputes with Ukraine that literally left Europeans in the cold during the dead of winter.7 These incidents launched real regulatory efforts to increase the security of energy flows.8 But even then, it took Russia’s invasion of Crimea in 2014 for the EU to delve into the bigger geopolitical questions of energy security and launch a European Energy Union.9 The Energy Union has fixed critical vulnerabilities but still was not able to stop plans to build new pipelines to Russia. The EU does not have forty years to steel itself against the risk of China’s technology and economic coercion. The digital economy is faster-moving and will be more fundamental to the transformation of Europe’s economy in the coming decades than energy trade with Russia has been so far. It may be more important for Europe to protect itself against the strategic vulnerabilities that can come from technological dependency on China than it was for Europe to get the gas question right, and Europe will have less time to do it. This paper explains what 5G technology is, assesses where the EU stands on telecoms infrastructure and 5G policymaking, compares the risks of Europe’s dependence on Russia for natural gas with the risks of dependence on China for 5G, and offers policy solutions and recommendations for Europe to reduce its vulnerability.
Topic:
Security, Energy Policy, Science and Technology, European Union, and 5G
Political Geography:
China, Europe, and United States of America

3299. Treasury’s War on Corruption: A U.S. Treasury Department Strategy to Fight Kleptocracy and Root Dirty Money Out of the U.S. Financial System

Author:
Josh Rudolph
Publication Date:
12-2020
Content Type:
Policy Brief
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
The incoming Biden administration has signaled through speeches, articles, and interviews that one of its top policy priorities will be combating corruption and kleptocracy.1 With Russia and China’s increasing usage of strategic corruption and malign finance as geopolitical weapons, and with publics around the world—including in the United States—angry about economic inequality and perceived corruption at home, anti-corruption offers a unique opportunity to unify U.S. foreign and domestic policy. Diplomats and lawmakers agree that cracking down on corruption may be the most viable way to restore American leadership by meeting demands for accountability from citizens all over the world.2 Corruption will be the topic of a dedicated special session of the UN General Assembly in June.3 The issue should get support from leaders at a G7 summit in the U.K. around the same time.4 Fighting corruption will also be one of the three areas for new country commitments at the Summit for Democracy that President-elect Joe Biden plans to host during his first year in office.5 At that summit, the U.S. commitment will be a “presidential policy directive that establishes combating corruption as a core national security interest and democratic responsibility.”6 Making this U.S. and international anti-corruption campaign a lasting success will require more than words. In the months ahead, while the administration’s top leadership and the nation’s public health and economic experts are focused on ending the pandemic and rebuilding the economy, the U.S. national security and financial enforcement community should get to work laying the groundwork for a raft of powerful anti-corruption executive actions to be announced in time for the Summit for Democracy. Concurrently, U.S. diplomats should leverage those plans to insist that countries attending the summit make similarly hard commitments, setting a high bar for admission.7 Regulatory rulemaking by the U.S. Treasury Department could usher in several landmark reforms that have been recommended for many years by financial enforcers, multilateral standard-setting bodies, and anti-corruption watchdogs. This policy opportunity is possible because the reforms never overcame opposition by special interests during the period before corruption became a leading national security threat roughly five years ago, and then they were generally not prioritized by the Trump administration. The most potent achievable action available would be for Treasury to set rules requiring several types of professional service providers that enable corruption to institute anti-money laundering controls whereby they would have to identify their ultimate customers and start alerting Treasury of suspicious activity, as is required of U.S. banks.8 Of the industries enabling corruption by helping wealthy clients hide money, ten could be regulated immediately by revoking regulatory exemptions to the Bank Secrecy Act, including real estate agents, private equity and hedge funds, sellers of yachts and airplanes, and seven other types of exempted financial institutions.9 Other key enablers would require new regulatory determinations with strong legal and political backing, such as lawyers, accountants, company formation agents, and art dealers. Treasury’s Financial Crimes Enforcement Network (FinCEN), which administers the Bank Secrecy Act, must write stringent regulations to implement the newly mandated beneficial ownership registry, resisting pressure by special interests to water it down. Treasury should also leverage concerns about the recently leaked “FinCEN Files” to work with Congress on a major investment in FinCEN, potentially on the scale of the seven-fold jump in budgetary resources needed by Treasury to implement recent reforms to the Committee on Foreign Investment in the United States (CFIUS).10 Treasury should publish its first-ever National Corruption Risk Assessment about the financial networks of kleptocracies and oligarchs, reviewing case studies and methods to assess vulnerabilities and risk. Treasury should create a cross-border payments database and make financial institutions scrutinize politicians’ accounts more closely. Treasury should continue supporting two policy initiatives that have developed strongly to pressure kleptocracies in the past couple years by internationalizing Global Magnitsky sanctions and collaborating with the International Monetary Fund on corruption engagement. The U.S. Treasury Department is uniquely positioned to roll out these and other policy, regulatory, enforcement, and diplomatic actions in the fight against corruption, because it is the only part of the U.S. government with a foothold in each area of domestic and international finance that will be key to rooting dirty money out of the global financial system and applying pressure on kleptocrats and their oligarch proxies. Many of Treasury’s most highly developed capabilities have grown out of past fights against top national security threats, such as terrorist financing. The two months following the September 11 attacks witnessed one of the most energetic and well-coordinated performances in Treasury Department history. With Treasury not yet organized and coordinated around anti-corruption, achieving anything like past feats would require Treasury to start by establishing a small team devoted exclusively to this new mission. Specifically, the Treasury Under Secretary for Terrorism and Financial Intelligence (TFI) should appoint a counselor dedicated to developing and advancing anti-corruption initiatives, from expanding the coverage of the U.S. anti-money laundering regime to prioritizing the threats of strategic corruption and malign finance across Treasury’s policy, intelligence, and enforcement efforts. Some of these projects could bear fruit in 2021, while others need longer-term development of capabilities to find kleptocrats’ money hiding within the financial system and prepare policy options to confiscate, sanction, or reveal it. The TFI anti-corruption counselor, who should be designated as early as possible in the administration, should have a staff of two and a mandate to coordinate with and leverage resources across the four principal TFI offices, while also cooperating with Treasury’s Office of International Affairs. And while the White House National Security Council should lead the overall fight against kleptocracy and corruption, the TFI anti-corruption counselor should serve as Treasury’s senior working-level point of contact for collaboration between Treasury and the rest of the U.S. government, as well as with international partners, civil society, and Congress. Combating corruption and kleptocracy will be one of the top priorities of the Biden administration, and Treasury has the resources to start delivering major results quickly. But to do so it must coordinate throughout the Treasury Department and with external partners to roll out big executive actions in 2021.
Topic:
Corruption, Finance, and Kleptocracy
Political Geography:
Russia, China, and United States of America

3300. Compounded Crisis in Belarus: Drivers, Dynamics, and Possible Outcomes?

Author:
Pal Dunay and Graeme P. Herd
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
George C. Marshall European Center for Security Studies
Abstract:
Until 2014, Belarus had embraced its Soviet legacy identity. After the Russian annexation of Crimea and its subsequent support for the separatists in Donetsk and Luhansk, elite discourse in Minsk favored a geopolitical shift away from Moscow and emphasized Belarus’ independent statehood and strategic autonomy. Elites tolerated and even co-opted a more nationalist agenda (including re-interpretations of history and the increased visiblity of nationalist symbols) and a clearer delineation emerged between pro-Russian and pro-Ukrainian public groups in Belarus, inspired also in part by the Ukrainian reform process, though this was not clearly reflected in institutional politics. Belarusian national identity lacks the deeper anti-Russian sentiment inhrerent in that of Ukraine. Russia responded by enhancing its profile in Belarus through increased Russkiy Mir and Rossotrunichestvo activities to positively shape public opinion, even as it distanced itself from Lukashenka. In the last few years, Russia more publicly challenged Lukashenka to make good on his pledges by signing and implementing the thirty-one roadmaps for Union State integration. The Wagner debacle of July 29 further strained relations, not least as President Alyksandr Lukashenka instrumentalized the arrests to suggest that Russia was the greatest threat to Belarusian sovereignty and only he could defend its statehood. The current political crisis can also be attributed to a number of accumulating internal proximate factors, which eroded support for an incumbent president seeking a sixth five-year term after twenty-six years in power: the mismanagement of COVID-19 responses; a lost economic decade in which recovery shackled the IT sector and entrepreneurship and initiated the 2017 “parasite tax” protests; the rise of “autocrat fatigue”; a generational change with those under forty years old not identifying with Lukashenka’s Soviet era models and mentality; and a generalized resistance to the idea that the election could be rigged as usual. The existing social contract was at breaking point.
Topic:
Nationalism, Conflict, Pandemic, COVID-19, and Political Crisis
Political Geography:
Europe and Belarus