Financing Threats to International Security
Espionage, terrorism, foreign influence, and more
When we talk about national security, we often talk about specific departments or agencies, their mandates, their activities (like espionage or counter-espionage), their intelligence collection capabilities like signals intelligence, human intelligence, or open source intelligence. We often try to tie this to threats to security — activities that threaten our economic prosperity, physical or cyber security, etc. But we rarely, if ever, talk about one thing that unites all these threats: money.
Regardless of the threat, it’s financed in some way. For example, if we look at threats as defined in Canada’s CSIS Act, we can see this link:
Espionage requires money: often this is provided through state budgets, perhaps through embassies, in electronic funds transfers or in cash, but we are increasingly seeing espionage activities undertaken and financed through cryptocurrencies. States like Russia use espionage to undermine democratic principles and processes, and fund those activities directly from state coffers or through elaborate webs of companies, individuals, and accounts.
Foreign influenced activities (aka foreign interference) are also financed in much the same way, but often using individuals as covers to provide payments to individuals or entities to help with things like the theft of intellectual property, to hide or obfuscate the true beneficial owner of a corporate acquisition (particularly in sensitive sectors like rare earth minerals,, aerospace, etc), or to simply pay individuals to undertake particular influence activities like intimidation of a diaspora community. Other examples include: Supporting the campaign of particular politicians, either through social media and influence campaigns, or in some cases through donations. These donations can be direct to the candidate, or might be received through third parties / proxies, in some cases in violation of election laws. States also pressure donors to give money to specific candidates.
They also use information operations and social media amplification to promote a particular policy objective.1 They will also invest money, pay for advertisements, or sponsor investigative journalism or interviews to promote their interests.
Terrorist activity of course also requires financing: terrorist groups, cells, and individuals need to raise money for their propaganda and attacks, and they move it domestically and internationally using our existing banking infrastructure as well as new technologies like cryptocurrencies.
There are also a number of other threats that have a financial component, like proliferation financing,2 sanctions evasion (those sanctions might be imposed on terrorists, human rights violators, war criminals, etc), and corruption & kleptocracy. All of these are threats to global security, and have a financial component that can be detected, and ideally, disrupted.
States and non-state actors seek to evade our detection mechanisms and finance these threats. We respond in a number of ways, including through investigation and prosecution, and also by implementing sanctions such as terrorist listings, state designations, and restrictions on import/export and investments.
In Canada, we actually have a fairly comprehensive framework to address threat financing. The problem is we lack measures of effectiveness, any real understanding of outcomes, prosecutions for violators, and meaningful investigative capabilities. In many other countries (particularly outside of the five eyes), the concept of threat financing is developing, at best.
What we know so far:
Threat financing is a stable of threat activity, but metrics to describe it are limited. We know that there have been two successful terrorist financing prosecutions in Canada; this is far below the number from most other countries with similar counter-terrorist financing frameworks and capabilities. And there has been a financial component to every attack or thwarted plot in Canada, and FINTRAC told us in 2018 that Canada is a base for financing activities for a number of groups. But it’s unclear why Canada has so few terrorist financing prosecutions: is there a problem with the public prosecution service? Our investigative capabilities? Something in the legislation? Other countries have had more success in prosecuting terrorist financing; and while this is not the sole (or even best measure) of disruption, it’s often the most concrete, and a logical place to start.
In other types of threats, it’s the lack of data that tells the story. How many accounts have been frozen as a result of Canada’s terrorist listings? Unknown. How many Russian accounts / assets have been frozen as a result of sanctions? We don’t have a clear picture, but the RCMP has started to tell us a bit more, indicating that since February 2022, $135,671,223 in assets have been frozen in Canada, and $292,263,795 worth of transactions have been blocked. They also told us that $78,838 worth of assets in Canada have been frozen as a result of the Iran SEMA sanctions, and none under the Haiti regulations.
But there are more unknowns than known. Has Canada detected any efforts by Russia (or other state actors like the DPRK) to use Canada to evade sanctions? Unknown. But given Canada’s global connectivity, strong financial system, and technologically advanced economy, I’d estimate that there are some state and non-state actors seeking to use the Canadian financial system to their benefit. But we have little ability to detect and disrupt this activity, and almost no incentive for security and intelligence agencies to share any successes publicly.
When we look at this internationally, there are even fewer metrics.
On top of that, the diffuse nature of our system and framework for detecting and disrupting threat financing is part of the problem. We have a network of departments and agencies all with a small piece of the puzzle. Of course, attention often falls on FINTRAC, Canada’s financial intelligence unit. This is similar internationally - the financial intelligence unit is often thought to be the centre of financial issues. But in many cases, their role in threat financing is relatively limited, because they often don’t have an investigative mandate. They receive and disseminate reports, a critical function, but they are not the hub of detecting and disrupting threat financing. That role should fall to law enforcement and security services, but in practice, countering threat financing is not prioritized.
For instance, the RCMP has struggled to protect supposedly ring-fenced financial investigators and resources; instead, they have been assigned to ‘more pressing’ investigations. While we can all understand the need to prevent threat to life activities like terrorist attacks, we also need to think about the long term. We can’t continue to allow, for example, Hizballah, to run a financing network; it enables their attacks and activities against our allies and threatens regional stability and by extension Canadian interests (not to mention the reputational damage that we suffer from allowing this to continue).
Of course, CSIS also has roles and responsibilities in combatting threat financing; and while their activities will always be less public, given how little information is dedicated to threat financing issues in their public reports, I have concerns about their ability to detect and disrupt this activity, and to prioritize it within their investigations.
There are several other key members of what I consider Canada’s threat financing regime: CBSA of course, CRA charities directorate, Global Affairs Canada, and many other consumers and producers of financial intelligence like CSE, Export Development Canada, the Privy Council Office, etc. This is truly a whole of government issue, but one that has received far too little attention. Internationally, all of these bodies and agencies need to be working together to combat threat financing. I can assure you that rarely happens.
What we need to do
If Canada and its allies want a robust economy, a safe and secure financial system, a more secure global community, and a good international reputation, we need to modernize how we approach threat financing. Detecting, analyzing, deterring or disrupting threat financing needs to be front and centre of our global security discussions.
What threats to global security don’t have a financial component? What happens if we get better at detecting and disrupting the financing of threats in Canada, and internationally? I would argue that we would step more firmly into “prevention” territory, rather than reacting to emerging or developing threats. We would have the ability to detect and disrupt threats as they emerge (or even before); preventing the next terrorist attack is obviously a key objective, but so should be preventing states from using Canada and other countries as a means to evade sanctions, hide the proceeds from their kleptocracy, and acquire companies and intellectual property in sensitive or strategic sectors.
Ignoring this issue will mean that some states become a safe haven for a variety of corrupt and illicit actors; and once they become entrenched, they will become the launching pad for a variety of international security threats. When we think about global security threats, we must consider the financial dealings that underpin these activities, and focus on detecting and disrupting the flow of money.
Want to read more about threat financing? Here are a few articles to get you started:
Caroline Orr Bueno, “Russia’s Role in the Far-Right Truck Convoy | The Journal of Intelligence, Conflict, and Warfare,” The Journal of Intelligence, Conflict and Warfare 5, no. 3 (January 31, 2023): Online.
Security Intelligence Review Committee, “SIRC Review 2016-01 CSIS’s Investigation of Terrorist Financing” (Security Intelligence Review Committee, 2016), 1, Released under access to information request 3103(18/09)