Ebook: Invisible Threats: Financial and Information Technology Crimes and National Security

The problems this ARW has to analyze and discuss are of paramount importance, perhaps the most important ones among those we have to face in the years ahead of us. Technology and the information revolution have changed the balance of power, both domestically and internationally, and are altering the dynamics of international relations.

Technology has altered and corroded the State's authority and strengthened nonstate actors, in particular transnational crime and terrorist organizations. The technological revolution, though positive in itself, is nonetheless successful in corrupting markets and weakening security. As has been said, cybercriminals and terrorists have already “crossed into the spectrum of information warfare”. This simply means that the same bases of sovereignty and state legitimacy are in jeopardy.

The traditional paradigms of international relations are challenged. Postinternational global theories, such as the turbulence paradigm, are now trying to read with new lenses the new state of the world.

As a consequence, states are not – or are not yet – “equipped or capable of controlling cybercrime at the individual state level”. At the same time, compliance with international agreements reduces the ability of our states to engage in information warfare.

To put it briefly, cyberspace is to our societies what the nervous system is to our bodies. The increasing dependence of our societies on technology makes it possible for organized groups of cybercriminals and cyberterrorists to inflict serious damage on our economies and national security. The more we become technologically sophisticated, the more we are vulnerable and possible targets of attacks of many types, also because cyberterrorism is “one of the fastest evolving areas of criminal behaviour”. Moreover, as a recent case study shows (J.L. Olson, 2004), “organized groups of cybercriminals carrying out coordinated attacks have a higher potential to inflict damage than do lone perpetrators”.

Research shows that defensive measures taken by governments focus at present on individual rather than on organized cybercriminality, though – as above said – the damage inflicted is higher when the criminals are organized.

There are different types of hackers. One possible categorization of them is based on their intent and motivation: interest, political protest, religion, and so on. It is also possible that cybercriminals are at the service of governments or corporations which engage them for economic or strategic intelligence reasons. The tools hackers have at their disposal are many, and more and more easy to use. The threats against our societies will grow both in seriousness and in frequency. So our national security will be more and more in jeopardy.

The Internet offers an ideal opportunity to cybercriminals to make money and to remain anonymous. Illicit profits can be made, laundered and transferred everywhere in the world in no time and with little or no risk. These profits, many times, serve to fund other criminal or terrorist activities. The link between organized criminality and terrorism being money, it is of enormous importance to elaborate measures, national and international, against criminal high-tech behaviour.

One of the major problems to be solved is related to the difficulty, or even impossibility, to detect and prosecute illicit activities which cross geographic and legal boundaries, and which, at the same time, expand exponentially due to broadband connections.

CERT/CC – the Computer Emergency Response Team/Coordination Center – has identified 1,090 computer vulnerabilities in 2001 and 4,129 in 2002, namely 4 times as much in only one year. This is also because the private sector obeys the law of profit and does not care as much about national security. One can understand the seriousness of the problem considering the state of dependence of critical infrastructures on the private sector. In the United States, for instance, “the military currently relies on commercial networks for 95% of its essential communications”.

The only way to protect our economies and military systems – I think – is to provide and increase state-dependent mechanisms of layered defences, including also encryption products which now operate with practically uncrackable 128-bit keys, and increase international cooperation among states as suggested, for example, by the Convention on Cybercrime of the Council of Europe of 2001.

Obviously, these security systems imply high costs estimated to reach up to several billion dollars, but the consequences, financial, industrial as well as strategic, of a cyber-attack on sensitive I-structures of a country risk having calamitous effects, also because the number of cyber-attacks increases at exponential rate every year.

As far as investigation is concerned, it is evident that traditional methods cannot cope with the new reality of cybercrime. Legislations and the legal sector at large should be revisited to deal efficiently with cyber illicit acts.

According to Interpol, “while organized crime groups have wasted no time in adapting new technologies to their ends, the efforts of the international community have remained fragmented and weapons of law enforcement almost obsolete”. Moreover, there is normally a time lag of some years between the upgrading of technological tools by the States vis-à-vis the immediate upgrading made by the rich criminal and terrorist groups.

Here, however, there is a problem with the enjoyment of civil rights, with particular reference to privacy, as proved by the provisions of the Patriot Act in the U.S.

Another serious problem is the absence of expertise among members of the judicial sector. New training on computer forensics is needed both for them and for members of the intelligence community. Data-mining software is also needed to track cyber-trails. Obviously, the use of encryption by criminal groups is a serious obstacle for investigations. The situation is very difficult, but we cannot simply accept the statement of Europol's crime Department Director when he says: “With cybercrime, it's become obvious that we've lost the battle even before we've begun to fight. We can't keep up”. A strong international cooperation is the key to try to be on the winning side. The afore mentioned Convention on Cybercrime, adopted by the Council of Europe, is a good example of what should be done.

From the legal and judicial point of view, it is evident that we are far behind the necessary level of modernization and harmonization of our juridical systems. Our traditional laws were devised to protect physical property and physical “goods”, and not the virtual assets of the world of computers.

Moreover, as it has been said, “many cybercrime investigations are ineffective because they focus on evidence, quantity, tracking, location, injury, and loss, just as though these physical elements are pertinent in the virtual world of cyberspace”.

On its side, the Internet offers cybercriminals and terrorists many opportunities, among which it: can be used anonymously, helps in raising money, is a recruiting tool, is an information gathering system, can be used to steal information and manipulate data, can be used to make propaganda, allows a group to appear more dangerous than in reality is the case, etc. In short, it is an extremely dangerous weapon in the hands of people who do not put limits, juridical or moral, to their actions.

Some other remarks concerning NATO seem to be important. During these last years, the Atlantic Alliance and the European Union have contributed consistently to European security, freedom and prosperity, with a partnership that has proved beneficial. With the enlargement of the E.U. and the perspective of the adhesion of the Balkan countries to the European Union, NATO is slowly handing over to the E.U. the responsibility of security in some Balkan states, with European forces engaged in peace support operations. The objective of peace-enforcing-making-keeping missions is to stabilize the region in order to be able to withdraw from it after the local authorities have full control of the situation. But, obviously, organized crime and its bedfellows, corruption and violence, appear currently as the main actors that hinder the achievement of this objective.

These criminal activities pollute politics, economy and reconstruction, and fuel disturbances, ethnic rivalry and violence. In areas of conflict the main threats are not only those created by war, material and humanitarian devastation, but also those created by the vacuum of legitimate and strong authority. This vacuum has given space to all kinds of crimes, both local and international, making the convergence of criminal activities with extremism and terrorism much easier.

Local police forces have problems of legitimacy, while international ones have problems of training and understanding of the local realities.

Military forces in peace operations are visible, predictable, and rational and, therefore, easy to be bypassed by local criminal ‘forces’ that are invisible, unpredictable and do not act rationally, at least in western eyes. To see does not mean to understand.

Intelligence is fundamental for foreign troops in areas of crisis, and has to go hand in hand with the operations. This synergy has however been often prevented by national approaches and susceptibilities.

It is obvious that fighting against the “untouchables” of the local society and the criminal organizations ruling in some countries of the area requires a type of knowledge and tools that the military and police did not have until now. The actors in the fight against these structures should therefore adopt the same global approach, adopting a functional and flexible network security disposal, with operations based on shared information and common analysis of the ‘enemies’ and of the objectives to be reached.

It is my hope that this Workshop, enriched by the contribution of so many experts coming from different countries and cultures will contribute to the solution of at least some of the problems and ‘invisible threats’ – corruption, trafficking in documents, high-tech crime and money laundering – that are challenging our societies and our security

I am deeply indebted to J.L. Olson (The Threats of Systematic and Organized Cybercrime and Information Warfare, 2004) for many of the ideas expressed in these few pages, as well as to M. Coen, PhD, Belgian Counsellor of Embassy, for her valuable advice. The editors wish to thank Silvia Ciotti Galletti for her invaluable assistance.

Umberto Gori, University Centre for Strategic and International Studies (CSSI), Florence, 2006

Besides the role played by internal institutions, as the Ministries of Interior or of Foreign Affairs, in the field of homeland security and fight against terrorism, certainly the E.U. has important duties and competences. Most of all, the cooperation between E.U. and the U.S.A. can become more and more intensive, even if sometimes it appears to be a bit difficult. In the following work, European roles and experiences about fighting and preventing terrorism are examined, also considering future perspectives.

Terrorist and people belonging to criminal networks always use fake or illegally obtained documents and visas to cover and hide their real identity. Sometimes these documents (most of all passports) are stolen in western countries by criminal organisations, or people connected with them, and used by terrorists and criminals to travel from a country to another. Usually, at an international level, this kind of thefts is seriously unevaluated, and investigations are not properly organised or co-ordinated: this allows criminal networks to carry on in a profitable way their illegal activities.

Criminal groups are characterised by various elements, as hierarchy, connection with a defined territory, permanence; but all their characteristics are devoted, at the end, to maintain the existence of the group, and to grant financial advantages to its members. To obtain the maximum of the economical profit, these groups are not devoted to a single, typical kind of traffic, but are involved in very different kind of criminal activities: cigarettes trafficking, prostitution, smuggling of migrants, and so on. We can trace many reasons owing to, at the date, is really difficult to fight and defeat organised crime; but the concrete threats that these organised criminal groups are carrying against legal economies, and the dangerous effects that they demonstrated to have on legal finances, make more and more urgent a common strategy in trying to stop their illegal behaviours.

Analysing the actual nature, and effects, and skills, of organised criminal groups, we can see that the term “organised crime” is not still adequate to the criminal situation all over the world; so, examining the real situation, considering the connection among these groups in the NATO and Western countries, we can say that the more appropriate term at date is “networked crime”. A deep and sharp analysis of the crime situation all over the world can suggest us that a final defeat of criminal networks is quite unrealistic: it's more affordable a containment strategy of their threats. In this containment strategy, control and fight against money laundering are absolutely essential: besides a continue adaptation of the legislation, a serious control on financial Havens can help the international community to break the boundaries among different criminal networks, interfering with their financial activities.

The legal framework concerning money laundering is absolutely fundamental in fighting criminal financial activities; and the FATF Recommendations and the E.U. Directives are a central part of this international framework. In details, French legislation attempts to prevent and fight money laundering activities with legal interventions about the duties of vigilance imposed to the banks and some specific obligations to report (internally and externally) anomalies and “doubts”.

When examining terrorism and organised crime, the financial aspect is perhaps one of the most important considerations, particularly when adopting an international perspective. Discovering financial channels is fundamental in identifying and locating terrorist groups and transnational criminal organisations; and delineating their economic boundaries and convergences is one of the most effective ways to both contrast and prevent their activities.

It should be noted at the outset that it is not easy to understand the financial aspects of organised criminals' and terrorists' activities. The difficulties in comprehending different money laundering systems are well known, and money laundering is only one aspect of the criminal financial field. And of course, this is not a new but a well-developed phenomenon, since terrorism and organised crime have had contacts, exchanges and co-operations for many years.

Usually, organised crime activities are not typical terrorist activities, even if we are unsure about which kind of actions are considered typical of the terrorist field. We have to consider some basic differences, which are fundamental to an understanding of the needs and uses of money in criminal and terrorist activity.

This work will examine the methods used by terrorism and organised crime to gain profit, draw out the differences and similarities, and suggest strategies to intervene practically in this field. It will also identify the various points of contact between these different organisations, and how they can co-operate (particularly economically and financially), sometimes becoming a single criminal group.

The nature of financial and IT crime is complicated, and therefore the steps aimed at countering such crimes encompass the following three main areas: drafting and adoption of new legislation; strengthening the administrative capacity; and enforcement/implementation.

During the last several years, many things have been said and done to curb terrorism, organised crime, corruption and other related activities. Like cancer, those activities are well alive, but more or less hidden, part of everyday life in many countries. One could say that corruption and organised crime are classical examples of public/private partnership; in a negative sense. It is clear that corruption is the fundamental basis on which are built organised crime and some elements of international terrorism. Countries in transition and new states, such as those which appeared after the collapse of the Soviet Union, Yugoslavia and Czechoslovakia provide good examples confirming this thesis. The reason for this is simple: democratic governments wishing to fight either organised crime or terrorism or both, as it is case today, must be: a) strong, and b) credible and respected in the eyes of the population. Corrupt governments, particularly those with a corrupt judiciary branch, are not able to effectively fight either organised crime or terrorism. Though their agencies can sometimes assist Western activities on their soil, this does not imply that corrupt governments are weak. In fact, they are capable of using force, often misusing it for the private interests of politicians and public officers. Simultaneously, there is a weakness within state apparatuses, because honest civil servants, and there are some, give up the fight. It is therefore evident that the territory of any country where corruption is widespread can adequately serve as both a rear and front base for activities related to organised crime and terrorism.

In recent years, the worldwide effort to combat money laundering and the financing of terrorism has assumed heightened importance. Money laundering and the financing of terrorism are global problems that not only threaten security, but also compromise the stability, transparency, and efficiency of financial systems, thus undermining economic prosperity. In the last decades a global trend has been observed in which a certain syndrome of anti-social conduct is viewed as particularly undermining the social fabric of the countries concerned and contextually menacing the global order. Because of the threat to domestic public order, such crimes are defined as “serious crimes”. Moreover, because of the menace posed in the international scenario such crimes are also considered “transnational crimes”. The issue of which crimes should fall within such category of crimes is a matter that goes beyond the scope of our work. However, after the enactment of the UN Transnational Organized Crime Convention 2000, there is a general consensus in the international community that money laundering is both serious and transnational in nature. More recently, after the 9/11 terrorist attacks on the US, a relatively new phenomenon is usually associated (rightly or wrongly) with money laundering: terrorist financing. Although money laundering as criminal conduct is different from terrorist financing (for instance, all money laundering schemes involve ill gotten funds, whereas in terrorist financing scheme a terrorist organization may be financed through both ill-gotten funds as well as perfectly licit money), many countries throughout the world have found it worthwhile to extend their anti-money laundering regimes to terrorism financing.

Electronic banking (e-Banking) is an important channel for the rationalisation of financial operations. All the operators have expanded their range of products and services available through electronic distribution channels to include online remittance services, credit card application, guaranteed fund trading service and electronic consolidated statements. In this way, we have seen an upgrade of telephone banking and internet banking systems that now are ready to provide 24-hour service capability and customer friendly features. Organized crime has also understood that the advent of the Internet has created a special opportunity to move huge quantities of money across borders, thereby reaching destinations all over the world. This situation requires the entire law enforcement structure to begin to consider and act against financial crimes such as money laundering, now called cyber laundering.

Recent trends in crime prevention and community safety in Slovenia have been characterised by the influence of ideas of crime prevention in Western societies, especially with the idea of community responsibilisation and involvement of local administration in setting priorities in safety/security efforts and prevention of everyday criminal offences. Since 1998 eighty local safety/security councils have been established. The police initiated the establishment of all councils. The councils have been situated within the local town/city/municipality administration as a consultative body in crime and safety/security matters. A legal basis for such councils is the Police Act and the Local Self-administration act. It is necessary to stress that both paragraphs are more or less “recommendations”. Therefore, a consultative body (a safety/security council) can be established by a municipality council. None piece of national legislation determines the obligations of such councils. The results of research based on 178 members of local safety/security councils imply problems related to definition of local crime prevention, community policing, disparities between proclaimed ideas and practice of crime prevention. The role of such councils is still debatable. It is also necessary to stress the necessity of criminological analysis of local crime and safety/security problems. So far, the majority of such councils have drawn conclusions mainly upon the police presentation of crime problems in their communities and »public opinion« about the root causes of criminality in their environments. Expectations of the police are related to more responsible local citizens but there exist a paradoxical weak bond of the police with local communities. In addition, a research on feasibility of the Council of Europe's urban crime prevention recommendation was conducted as well.

Despite all the achievements of the past few years, the Western Balkans (Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Serbia and Montenegro) are still perceived as a region characterised by high political and economic instability. The events of the last fifteen years have left many problems unresolved which are still today impeding lasting peace and stability. Among the multiple problems of the Western Balkan countries today, diffused criminal activities are probably among the most complex, as they have proved very difficult to eradicate. Although there have been a number of positive initiatives in recent years against organised crime in Southeast Europe, also within the numerous activities of the Stability Pact for Southeast Europe and the Southeast European Cooperation Process, criminal activities continue to represent a serious impediment to achieving more permanent regional stability, and as such are also a major threat to security for the whole of Europe. Organised crime in the Western Balkans is also considered a major obstacle for integrating these countries into the European Union (E.U.). A better understanding of these problems is therefore fundamental, as it can help in the search for remedies for combating crime in the Western Balkans in the future, as well as contribute to their swift integration into the E.U.

In trying to shed light on these complex issues, this paper will first give an overview of the multiple factors that have contributed to widespread criminality in the Western Balkans (part 2). Next, it will examine E.U. policies towards the Western Balkans, both during the 1990s and in the post-1999 period, when the Stabilisation and Association Process finally offered these countries prospects of E.U. membership (part 3). Within such European perspectives, some critical elements of E.U. policies towards the Western Balkan region are discussed (part 4). The paper ends with a few concluding remarks (part 5).

The milieu for terrorism is most lethal where there is a mix of transnational and corruption. This occurs particularly in post-conflict regions where secondary level organized crime groups operate, often relying and cooperating with corrupt law enforcement and members of the security apparatus. The paper explores the elements of these relationships in different regional contexts.

This study analyses modes of control territory in conflict areas such as the Balkans, as well as other regions, where international security forces (military and police) have a specific mandate to support a government and ensure a safe and secure environment. This kind of control is necessary where political sovereignty is exercised on behalf or under the auspices or supervision of the international community by a transitional authority or by a local government troubled with stability problems. This contribution cannot take place during open hostilities or in a situation in which the military forces act as occupying power. In those situations we assume that the military forces have the authority and the obligation to exercise full control of the security factors for a determined period of time according to the needs and laws of war. During the occupation, according to International Humanitarian Law, the “de facto” control of the whole territory or part of it exercised by military forces is sufficient to oblige them to take over the responsibility to protect the civilian population, ensure the survival and the basic rights of the citizens, protect and carefully manage the resources of the country.

An examination of the geopolitical situation of Georgia demonstrates that it plays a key role in the whole Caucasus region and far beyond it. Criminalization processes and formation of corrupt ruling clans in Georgia in post-Soviet era, and local armed conflicts seriously undermined security both national and regional. During last decade internal armed conflicts in Georgia have been transformed into uncontrolled criminal zones, and smuggling was intensive through these territories.

An analytical review of the current situation in Georgia after the “Rose Revolution” in November 2003 allows better understand the reasons and atmosphere in which contraband trade was flourished in the country, how it threatens stability and security in the Caucasus region and in Europe, and what measures have been taken by the Government of Georgia to minimize it. Contraband trade through conflict zones in Georgia is not just a national problem. The more Georgia becomes integrated into the European community the more it is responsible for European security.

The presentation looks at the current state of fighting against contraband trade by examining the following factors: Georgian legislation and its implementation; the activities of organizations, which are responsible for struggle against contraband and implementation of projects aimed at its minimization in Georgia; and political, economic, and administrative measures aimed at minimization of contraband trade in Georgia.

Our assessment of contraband trade is based on data from the Georgian Border Guards, Department of Intelligence, Ministry of State Security, Ministry of Internal Affairs, General Prosecutor's Office, courts, local and international NGOs, opinions of experts, analyses of publications in Georgian media, and interviews with people who are directly involved in smuggling. This helps us to understand the main forms, mechanisms, and groups which participate in contraband trade through different regions of Georgia which is a country of international transit ways from east to the west, and from north to the south.

Despite the ongoing efforts of the Russian government to suppress terrorists in Chechnya, their major groups demonstrate solid resilience and, as the recent deadly attacks against Russian military and civilian targets shows, maintain the capacity to carry out massive and sophisticated violent operations inside Chechnya and well beyond its borders. In this situation, when the Russian government troops and the pro-Moscow Chechen administration maintain significant control over the Chechen territory and population, one possible explanation for the terrorists' sustainability remains their past and, probably, current involvement in organized crime activities. This research argues that the process of convergence of the terrorist groups in Chechnya with organized crime groups in Chechnya and outside the republic, respectively, can be tracked through the analysis of a set of watch points of linkages. Also, in a reverse manner, analysis of the actual developments may help to identify other critical watch points.