With the trade war with China and Russiagate in full display every evening in the mainstream Western press, where the anti-Trump narrative is pushed relentlessly, it is easy to miss the continued assault on our financial system by adversarial state actors and their proxies. Today’s conflict between nation states consists of much more than military power projection capability.
Information warfare, as well as financial warfare, has become the norm. China, Russia, North Korea and Iran have been targeting America in these capacities for some time now; however, it is only recently that the United States has decided to fight back.
With China, the threat is systemic. Beijing has spent decades placing hundreds of thousands of ‘student’s in our laboratories and universities, where they consistently send material information and technology back home. China’s manipulation of its currency is legendary, and the forced technology transfer inside the Middle Kingdom is ruthlessly effective — hence the rapid growth of the Chinese economy. Thankfully, the Trump administration seems to now have the willpower, and the tariff firepower, to finally confront many of these financial and espionage threats.
Russia is a different story. In a perverse way, the constant media attention to the Trump-Russia narrative has blinded much of the country to the real threats from Moscow and its proxies. Russia is perfecting the art of disinformation and plausible deniability, using third parties to achieve its political and foreign policy goals, many of them financial in nature.
As perfect example of this agenda is the use of Evgeney Prigozhin’s “Wagner Group” to search out vulnerable commodities around the world and harvest them. Using mercenaries to achieve a state’s financial goals is a centuries old strategy and one the Kremlin has resurrected. Wagner has been active in Syria, seeking to control its oil wealth, and is appearing routinely today in multiple African locations, including the Central African Republic, where the group is exploiting mineral deposits.
As the U.S. continues to enjoy financial hegemony due to the Bretton-Woods agreement and the associated USD global financial dominance, the Kremlin has found other ways to get around the American financial system, even using it to their advantage. In spite of the West’s efforts to protect its financial system from nefarious influence, we routinely see massive enabling of money laundering and fraud by major Western financial institutions. The wealth of organized crime is always tempting by lowly banking employees who can turn their gaze away from money transfers that have an obvious bad smell.
We wrote late last year about the case of the Ananyev brothers, Alexei and Dmitry, Russian oligarchs that have been accused of defrauding mom and pop investors in Russia by looting Promsvyazbank (PSB), one of Russia’s top 10 financial institutions, and how a half billion dollars was wired from Russia to Cypress, in an overnight raid of the bank’s capital. The Western press has detailed how the brothers allegedly targeted selected depositors and made them an offer they couldn’t refuse: take their money out of their low-interest accounts in PSB and invest in private notes that promised a much higher return on investment. The presentations were slick and polished and threw around the names of one major U.S. bank as “Trustee,” in a way that gave these relatively unsophisticated investors a false sense of safety and security. The brothers allegedly used their two banks as collateral and pocketed approximately $250 million of depositor’s money.
The U.S. banking system is critical to Russian oligarchs obtaining and hiding hard currencies — dollars and euros — in offshore accounts. Rubles are useless to the Kleptocracy because they remain within the reach of the Russian government. U.S. dollars are the oxygen oligarchs breath to stay alive.
The U.K. has placed a worldwide freeze on the brother’s accounts and the case is scheduled to be litigated in February.
PSB has been taken over by the Russian government and is now a “sanctions-buster bank” that provide huge amounts of capital to the Russian defense industry. It is cordoned off from the rest of the Russian banking system to protect the Russian economy from the impact of U.S. sanctions.
The West must become much more successful in cordoning off its financial system from the malign activity of our global adversaries. If oligarchs from repressive regimes can easily move dollars around the world, then we are obviously vulnerable to more malicious activity in our banking system. We saw after 9/11 how critical this sector is to the American economy. it is time we acted like we realize that.