Russia Denied CW Report in Syria, Not so Fast

Posted on June 18, 2017June 18, 2017 by Denise Simon

When U.S. Secretary of State Rex Tillerson met with Lavrov and Putin a few weeks ago, evidence was presented of chemical weapons use by the Assad regime. As was expected, the Kremlin denied the evidence, they always deny. Further, the Russians demanded their own investigation, which of course wont happen. What is interesting, the report Tillerson presented was not performed by American officials.

But let us go deeper. It is important to introduce the Cyprus branch of Tanzania’s FBME Bank Ltd. and Balec Ventures Limited.

The Cyprus branch of Tanzania’s FBME Bank Ltd may have assisted the Syrian regime in financing and developing its chemical weapons programme by facilitating transactions between a number of shell companies worth hundreds of million dollars which should have raised red flags, a report suggests.

Balec Ventures Limited, a company registered in the British Virgin Islands (BVI) and its owner Issa al-Zeydi, a Syrian national, appear to have played a central role in by-passing US sanctions against Syria, according to a report produced by the London-based accounting firm Ernst & Young (EY) and obtained by the Cyprus Business Mail. EY identified Balec’s link to the Syrian Scientific Studies Research Centre (SSRC), responsible for the development of chemical weapons for Bashar al-Assad’s regime, after the US placed al-Zeydi on its sanctions list.

Balec, registered at P.O. Box 3321, Drake Chambers, Road Town, Tortola, shared the same BVI address with five other companies with mainly Russian or Belorussian ultimate beneficial owners (UBO), and Tredwell Marketing Ltd, the EY report said. The Central Bank of Cyprus (CBC) appears to have suspected Tredwell -which was transacting with Balec and the other five companies- of being linked to SSRC, according to the EY report.

EY did not immediately respond to a request to confirm the authenticity of the report. The Central Bank of Cyprus was not immediately available for comment. The anti-money laundering squad Mokas said that it was unaware of the existence of the report.

The other companies, EY identified for sharing the same address with Balec and Tredwell, were Maribo Group Ltd, Paramia Ltd, GloBalance Group, Osborn Holdings Inc (all operating from Russia with Russian UBOs) and Sunhouse Consulting (operating from Belarus with a Byelorussian UBO).

According to the US Federal Financial Institutions Examination Council directives, uniform standards for federal examinations of financial institutions in the US, “transacting businesses (that) share the same address, or have other address inconsistencies,” are reason for raising a “red flag” for compliance officers in banking.

“Issa Al-Zeydi is the sole ultimate beneficiary of the account, holds a Russian passport, was born in Syria and maintains a Russian address,” EY said in their report. A review revealed that Al-Zeydi’s passport listed Moscow, as his address. Balec’s operating address was Office 31, House 14, Gubkina Street, Moscow, Russia, according to the EY report.

Law firm Hogan Lovells US LLP commissioned the EY report on behalf of FBME. EY looked into 11 notices of finding by the Finance Crime Enforcement Network (FinCEN), a branch of the US Treasury which in July 2014 described FBME as a financial institution of primary laundering concern. FinCEN barred US banks from opening and maintaining correspondent accounts with FBME. The “confidential” EY report is dated December 5, 2014.

FBME challenged at US courts FinCEN’s findings and decision by imposing the fifth measure under the US Patriot Act, to shut it out from the US financial system.

In October 2014, the US included al-Zeydi, together with Ioannis Ioannou, a Cypriot national, and two Cyprus-based companies, Piruseti Enterprises Ltd and Frumineti Investments Ltd, in the list of specially designated nationals of the US Department of Treasury, citing support, including “financial, material, or technological” to the Assad regime on behalf of which they acted. Piruseti and Frumineti were not FBME customers.

“FBME facilitates U.S. sanctions evasion through its extensive customer base of shell companies,” said FinCEN in July 2014 in its notice of finding in relation to the Syrian regime’s SSRC. “For example, at least one FBME customer is a front company for a U.S.-sanctioned Syrian entity, the SSRC, which has been designated as a proliferator of weapons of mass destruction. The SSRC front company used its FBME account to process transactions through the U.S. financial system”.

The FinCEN report prompted the Central Bank of Cyprus to place the FBME Cyprus branch under administration and subsequently resolution. In 2015, the CBC fined FBME €1.2m for failing to adhere to the provisions of anti-money laundering legislation and revoked its licence.

According to FinCEN, the SSRC front company -which in July 2014 it did not name-, “also shared a Tortola, British Virgin Islands address with at least 111 other shell companies, including at least one other additional FBME customer that is subject to international sanctions”.

The EY report was shared with FinCEN, the US Department of Justice, the Bank of Tanzania, which supervised FBME Bank Ltd, the Central Bank of Cyprus, supervisor of FBME Bank (Cyprus) Ltd, the European Central Bank, the International Monetary Fund (IMF) and the European Commission. The last three bodies were overseeing Cyprus’s bailout programme at the time, which included provisions for tougher measures against money laundering.

As a result of the stricter anti-money laundering rules put in place, Cyprus scored best among a list of 12 analysed countries -including the US, UK, Germany and Australia- in a February 2017 report prepared by the anti-corruption watchdog Transparency International.

“The Bank (FBME) identified Tredwell from a list of 9 FBME customers for which the CBC requested past files from FBME on 08/07/2014 (August 7, 2014),” EY said in their report. “FBME noted that on the list received from the CBC, the comment “SSRC?” was written next to Tredwell”.

On March 19, 2014, five months before the central bank inquired about Tredwell at FBME, Tredwell closed its account and transferred its funds to Armas Marketing Ltd. The UBO of Armas was Ruben Nadra, a Syrian with a Russian Passport, who happened to be Tredwell’s former UBO, while its address was in Seychelles.

On April 10, 2014, the FBME compliance department closed Maribo’s account. It also froze Balec’s account on October 17, and did the same with that of Osborn on May 29, 2014. GloBalance closed its account on May 10, 2011, while by the time of the completion of the report, the Paramia and Sunhouse accounts were open when the report was completed.

The US and other western countries blamed Assad, an ally of Russia’s President Vladimir Putin, for the August 2013 attacks with chemical weapons in Ghouta, an area east of Damascus, in which hundreds of civilians lost their lives. The Russian government disputed that Assad, involved for more than six years in a civil war that killed hundreds of thousands and displaced millions, was responsible for the attack.

“The business operates in the dealings of securities and shares and has reflected an expected turnover on the account of approximately $10m annually since account inception,” EY said in reference to Balec which included in its business profile other activities such as the wholesale sale of textiles, steel, construction equipment supplies and other goods.

After Balec opened an account at FBME on December 4, 2006, it carried out from that date until July 18, 2014 transactions with other 50 FBME customers, entities and individuals, worth $255.4m (€232.5m), the report said. The firm also carried out additional transactions with other 342 non-FBME customers in the same period totalling $252.6m. The sum of all transactions carried out through FBME totalled $508m.

*** Now enter Michael Weiss with his summary published by CNN.

Money stolen by Russian mob linked to man sanctioned for supporting Syria’s chemical weapons program

An investment group that U.S. authorities say is run by Russian mobsters and linked to the Russian government sent at least $900,000 to a company owned by a businessman tied to Syria’s chemical weapons program, according to financial documents obtained by CNN.

According to a contract and bank records from late 2007 and early 2008, a company tied to a state-backed Russian mafia group, according to U.S. officials, agreed to pay more than $3 million to a company called Balec Trading Ventures, Ltd — supposedly for high-end “furniture.”

Wire transaction records seen by CNN confirm that at least $900,000 was transferred.

Both businesses are registered in the British Virgin Islands.

The company allegedly tied to Russian mafia was called Quartell Trading Ltd., and the U.S. Department of Justice claims it is one of the many vehicles into which millions of dollars of stolen Russian taxpayer money was laundered a decade ago in connection with the so-called “Magnitsky affair,” perhaps the most notorious corruption case in Vladimir Putin’s Russia.

Balec Ventures is owned by Issa al-Zeydi, a Russian whom the U.S. Treasury Department sanctioned in 2014 for his connection to the Scientific Studies and Research Center, the hub of Syria’s nonconventional weapons program, including its manufacture of Sarin and VX nerve agents and mustard gas.

The $230 million tax fraud

According to U.S. Congress and the U.S. Department of Justice, a band of Russian mafia called the Klyuev Group consists of past and present officials in the Russian Interior Ministry, two Moscow tax bureaus and the Federal Security Service, or FSB, the domestic intelligence service and successor body to the Soviet KGB.

In 2007, authorities say, the Klyuev Group, colluded to fraudulently seize the ownership of three subsidiary companies connected to a Moscow-based Hermitage Capital Management, then the largest hedge fund in Russia.

The Klyuev Group then fabricated hundreds of millions of dollars in losses for these companies that they had taken over. That enabled them to apply for a tax refund of $230 million.

The entire amount was processed in a single day, Christmas Eve 2007, by Russian tax officials on the Klyuev payroll.

Sergei Magnitsky, the lawyer hired by Hermitage Capital to investigate the theft, uncovered this vast criminal conspiracy and the players behind it. He was arrested in 2008, denied urgent medical care for over a year in pretrial detention and physically tortured before his death in Moscow prison in 2009 at age 37.

In 2012, Congress passed the Sergei Magnitsky Rule of Law Accountability Act, under which some three dozen Russian officials have been sanctioned.

The Kremlin rejects the U.S. version of events. Moscow insists that the lawyer died of “heart failure” and that he was the real tax cheat. A Russian court even put him on trial posthumously and found him guilty in 2013. It marked the first time in Russian history that a corpse was successfully prosecuted.

Follow the money — and dead bodies

Much of the $230 million from the Klyuev Group heist has since been located and frozen in jurisdictions all over the world. “Magnitsky stumbled into more than he realized, and more than we realized even after the passage of the Magnitsky Act,” Daniel Fried, the former U.S. Coordinator for Sanctions Policy, told CNN.

The U.S. Attorney in New York charged Prevezon Holdings, a Cyprus-registered company owned by the son of an influential Russian official, with having purchased Manhattan real estate and opened U.S. bank accounts using some of the pilfered funds. That case was settled in May. In the settlement, Prevezon did not acknowledge any wrongdoing and the U.S. government agreed not to pursue the company in any further litigation tied to this case.

Another related asset forfeiture case is still ongoing in Switzerland where authorities have relied on evidence turned over by Alexander Perepilichny, a Russian expatriate who confessed to having been the principal money launderer for the Klyuev Group before he broke ties with it.

The evidence showed Credit Suisse bank accounts in Switzerland where some of the stolen money had been deposited. One of those Swiss accounts belonged to Quartell Trading, which is Perepilichny’s company — or was before he dropped dead suddenly while jogging near his home in Surrey in November 2012.

At only 44 years-old and not known to have been in ill health, Perepilichny’s death was initially declared “unexplained” by British police until traces of gelsemium, a poisonous flower, were discovered in his stomach.

A state coroner’s inquest into the case began in Britain on June 5 and was upended when BuzzFeed reported a week later that the U.S. Office of the Director of National Intelligence, the body that oversees all U.S. spy agencies, concluded with “high confidence” that Perepilichnyy was killed on orders by Vladimir Putin.

Citing more than a dozen past and present intelligence officials in the U.S., UK and France, BuzzFeed alleged that the British government was suppressing crucial evidence. BuzzFeed said that the British government refused to comment on the report.

More recently, in late March 2016, a lawyer for Magnitsky’s family nearly died when he fell from the fourth floor of his apartment building, a day before he was due to submit new evidence to a Moscow court.

A dubious transaction

A signed contract dated December 18, 2007 — just days before the Klyuev Group’s fraudulent $230 million refund was processed — show that Perepilichny’s Quartell Trading agreed to buy $3,172,000 worth of high-end “furniture” from Balec Ventures, Issa al-Zeydi’s company.

A copy of a SWIFT transaction also obtained by CNN show that $900,000 of that amount was wired from Quartell Trading to Balec a few weeks later, on January 25, 2008.

It is unclear whether any of the vaguely described items was ever delivered to the listed address, a warehouse in Kharkiv, Ukraine.

Balec’s bank, the Federal Bank of the Middle East (FBME), approved the transaction for filing five days later, on January 30, 2008. Notably, the bank also stamped the document “checked for money laundering purposes.”

Less than a month later, according to the U.S. Justice Department, Quartell received nearly 2 million euro from a Latvian bank account that had received some of the stolen $230 million.

FBME, which was based in Tanzania, could not be reached for comment for this story. In May, the institution was shut down by Tanzania’s central bank because of U.S. accusations that it was “used by its customers to facilitate money laundering, terrorist financing, transnational organized crime, fraud, sanctions evasions and other illicit activity internationally and through the US financial system,” according to the US Treasury Department’s Financial Crimes Enforcement Network.

There are oddities to Quartell-Balec transaction, according to financial analysts consulted by CNN who have examined the contract and supporting documents.

For one thing, Balec is described by FBME as being commercially engaged in the “buying/selling [of] promissory notes” and the import and export of building materials such as ceramic and marble tiles, timber, steel coils and “furnitures” [sic].

But it has no public profile or corporate website on which to showcase its inventory.

Ties to Assad’s WMD?

The Syria-born Issa al-Zeydi does not have a conspicuous public profile in Russia, apart from a largely inactive social media page on VKontake, the Russian version of Facebook, which CNN has confirmed belongs to the man who owns Balec Ventures.

He graduated in 1964 from Bauman Moscow State Technical University, where he studied engineering.

According to corporate registration records in Russia, al-Zeydi is also the owner and/or CEO of several small companies with next to no capital.

One of these, Aldzhamal Interneshal, claims to work in “non-specialized wholesale trade,” “the production of petroleum products” and the “manufacture of industrial gases.”

He was also the director of Enterprises Ltd. and Fruminenti Investments Ltd., two companies that the U.S. sanctioned in 2014 for their connection to the Scientific Studies and Research Center, Syria’s government agency responsible for developing and producing non-conventional weapons and ballistic missiles,” according to the US Treasury’s Office of Foreign Assets Control (OFAC).

It is unclear if any of the $900,000 that Quartell wired to Balec went to support the Center.

Following the sarin attack in Syria in April, which prompted President Donald Trump to authorize US airstrikes against a Syrian airbase, the Treasury Department further sanctioned 271 employees of the Scientific Studies and Research Center, describing it as “one of the largest sanctions actions in its history.”

Repeated attempts to contact Issa al-Zeydi in Moscow for this story, using the registered addresses of his Russian-based companies and phone numbers, proved unsuccessful.

Why is China Protecting North Korea? Reasons Abound

Posted on June 16, 2017June 16, 2017 by Denise Simon

Primer:

The United States Computer Emergency Readiness Team (US-CERT) issued a technical alert about the activity of the North Korea’s ‘Hidden Cobra’ APT group.
The joint Technical Alert (TA) report is the result of the efforts between of the Department of Homeland Security (DHS) and the Federal Bureau of Investigation (FBI).

The US Government has tracked the hacker group as Hidden Cobra, but the APT is most popular as the Lazarus APT Group.

The activity of the Lazarus Group surged in 2014 and 2015, its members used mostly custom-tailored malware in their attacks and experts that investigated on the crew consider it highly sophisticated.

This threat actor has been active since at least 2009, possibly as early as 2007, and it was involved in both cyber espionage campaigns and sabotage activities aimed to destroy data and disrupt systems. Security researchers discovered that North Korean Lazarus APT group was behind recent attacks on banks, including the Bangladesh cyber heist.

According to security experts, the group was behind, other large-scale cyber espionage campaigns against targets worldwide, including the Troy Operation, the DarkSeoul Operation, and the Sony Picture hack.

The joint alert from the FBI and the DHS further details on the group, including indicators of compromise (IoC) for its DeltaCharlie botnet involved in the “Operation Blockbuster” to power DDoS attacks. More here.

*** Most of North Korea’s cyber operations are located in China hosted on Chinese communications internet/communications platforms. It is espionage of an epic standard. But let us go deeper.

(Remember, Obama removed Cuba in 2015 from the terror list as a means to establish the process to normalize relations)

*** Image result for north korea minerals

Few think of North Korea as being a prosperous nation. But it is rich in one regard: mineral resources.

Currently North Korea is alarming neighbors with its frequent missile tests, and the US with its attempts to field long-range nuclear missiles that can hit American cities. A sixth nuclear test could be imminent. An attack on the US or its allies would be suicidal, so Pyongyang probably aims to extract “aid” from the international community in exchange for dismantling some of its weaponry—rewind about 10 years to see the last time it pulled off the old “nuclear blackmail” trick.

AP

But however much North Korea could extract from other nations that way, the result would pale in comparison to the value of its largely untapped underground resources.

Below the nation’s mostly mountainous surface are vast mineral reserves, including iron, gold, magnesite, zinc, copper, limestone, molybdenum, graphite, and more—all told about 200 kinds of minerals. Also present are large amounts of rare earth metals, which factories in nearby countries need to make smartphones and other high-tech products.

NKNews

Estimates as to the value of the nation’s mineral resources have varied greatly over the years, made difficult by secrecy and lack of access. North Korea itself has made what are likely exaggerated claims about them. According to one estimate from a South Korean state-owned mining company, they’re worth over $6 trillion. Another from a South Korean research institute puts the amount closer to $10 trillion.

State of neglect

North Korea has prioritized its mining sector since the 1970s (pdf, p. 31). But while mining production increased until about 1990—iron ore production peaked in 1985—after that it started to decline. A count in 2012 put the number of mines in the country at about 700 (pdf, p. 2). Many, though, have been poorly run and are in a state of neglect. The nation lacks the equipment, expertise, and even basic infrastructure to properly tap into the jackpot that waits in the ground.

In April, Lloyd R. Vasey, a senior adviser at the Center for Strategic and International Studies, noted that:

North Korean mining production has decreased significantly since the early 1990s. It is likely that the average operational rate of existing mine facilities is below 30 per cent of capacity. There is a shortage of mining equipment and North Korea is unable to purchase new equipment due to its dire economic situation, the energy shortage and the age and generally poor condition of the power grid.

It doesn’t help that private mining is illegal in communist North Korea, as are private enterprises in general (at least technically). Or that the ruling regime, now led by third-generation dictator Kim Jong-un, has been known to, seemingly on a whim, kick out foreign mining companies it’s allowed in, or suddenly change the terms of agreements.

Despite all this, the nation is so blessed with underground resources that mining makes up roughly 14% of the economy.

A “cash cow”

China is the sector’s main customer. Last September, South Korea’s state-run Korea Development Institute said that the mineral trade between North Korea and China remains a “cash cow” for Pyongyang despite UN sanctions, and that it accounted for 54% (paywall) of the North’s total trade volume to China in the first half of 2016. In 2015 China imported $73 million in iron ore from North Korea, and $680,000 worth of zincin the first quarter of this year.

North Korea has been particularly active in coal mining in recent years. In 2015 China imported about $1 billion worth of coal from North Korea. Coal is especially appealing because it can be mined with relatively simple equipment. Large deposits of the stuff are located near major ports and the border with China, making the nation’s bad transportation infrastructure less of an issue.

For years Chinese buyers have purchased coal from North Korea at far below the market rate. As of last summer, coal shipments to China accounted for about 40% (paywall) of all North Korean exports. But global demand for coal is declining as alternatives like natural gas and renewables gain momentum, and earlier this year Beijing, in line with UN sanctions, began restricting coal imports from its neighbor.

The sanctions game

After North Korea conducted its first nuclear test in 2006, the UN began imposing ever stronger sanctions against it. Last year the nation’s underground resources became a focus. In November 2016, the UN passed a resolution capping North Korea’s coal exports and banning shipments of nickel, copper, zinc, and silver. That followed a resolution in March 2016 banning the export (pdf) of gold, vanadium, titanium, and rare earth metals.

The resolutions targeting the mining sector could hurt the Kim regime. Before they were issued, a 2014 report on the country’s mining sector by the United States Geological Survey noted that (pdf, p. 3), “The mining sector in North Korea is not directly subject to international economic sanctions and is, therefore, the only legal, lucrative source of investment trade available to the country.”

That is no longer the case.

Of course, Pyongyang has grown adept at evading such sanctions, especially through shipping. Glimpses of its covert activities come from occasional interceptions of vessels. Last August Egyptian authorities boarded a ship laden with 2,300 tons (2,087 metric tons) of iron ore heading from North Korea to the Suez Canal (they also found 30,000 rocket-propelled grenades below the ore).

Earlier this year a group of UN experts concluded that North Korea, despite sanctions, continues to export banned minerals. They determined, as well, that North Korea uses another mineral—gold—along with cash to “entirely circumvent the formal financial sector.”

Interested neighbors

Meanwhile China’s overall trade with North Korea actually increased 37.4% (paywall) in the first quarter compared to the same period last year. Its imports of iron ore from North Korea shot up 270% in January and February from a year ago. Coal dropped 51.6%.

North Korea’s neighbors have long had their eyes on its bonanza of mineral wealth. About five years ago China spent some $10 billion on an infrastructure project near the border with North Korea, primarily to give it easier access to the mineral resources. Conveniently North Korea’s largest iron ore deposits, in Musan County, are right by the border. An analysis of satellite images published last October by 38 North, a website affiliated with Johns Hopkins University, showed mining activity was alive and well in the area.

China particularly covets North Korea’s rare earth minerals. Pyongyang knows this. It punished Beijing in March by suspending exports of the metals to China in retaliation for the coal trade restrictions.

Meanwhile Russia, which also shares a (smaller) border with North Korea, in 2014 developed plans to overhaul North Korea’s rail network in exchange for access to the country’s mineral resources. That particular plan lost steam (pdf, p. 8), but the general sentiment is still alive.

But South Korea has its own plans for the mineral resources. It sees them as a way to help pay for reunification (should it finally come to pass), which is expected to take decades and cost hundreds of billions or even trillions of dollars. (Germany knows a few things about that.) Overhauling the North’s decrepit infrastructure, including the aging railway line, will be part of the enormous bill.

In May, South Korea’s Ministry of Land, Infrastructure and Transport invited companies to submit bids on possible infrastructure projects in North Korea, especially ones regarding the mining sector. It argued that (paywall) the underground resources could “cover the expense of repairing the North’s poor infrastructure.”

It was, of course, jumping the gun a bit. For now South Korea—and the world—is stuck with a bully in the mineral-blessed North.

***

China is undergoing a major military build up around the world and has even included collaboration with Pakistan.

The new assessment focuses instead on the buildup on Spratly Islands, noting that previous year the Mischief, Subi and Fiery Cross Reefs, three of the largest outposts, saw the construction of 24 administration buildings, barracks, fixed weapons positions, communication facilities and fighter-sized hangars by China, each of them with runways 8,800 feet long.

While the report notes that China has not undertaken any new land reclamation projects on disputed features in the South China Sea during 2016, it did accuse China of further militarizing the contested Spratly Islands via the construction of 24 hangars capable of housing fighter aircraft, fixed weapons positions, barracks and communication facilities.

Beijing has opposed the deployment of a U.S. missile shield in South Korea to defend against attacks from North Korea, in part because it says it could be used to counter China’s capabilities.

Meanwhile Pakistan itself has not made any comments about this statement.

Published Tuesday, the Pentagon report estimated that China spent US$180 billion previous year on its military – the world’s largest – a figure well over the country’s official US$140 billion defence budget.

The report made “irresponsible remarks on China’s national defense development and reasonable actions in defending our territorial sovereignty and security interests in disregard of the facts“, foreign ministry spokeswoman Hua Chunying told reporters yesterday.

“China likely will seek to establish additional military bases in countries with which it has longstanding, friendly relationships“, the report predicts.

China has cited anti-piracy patrolling as one of the reasons for developing what it calls a naval logistics center in Djibouti.

“China’s expanding global economic interests are increasing demands for the [Chinese Navy] to operate in more distant maritime environments to protect Chinese citizens, investments, and critical sea lines of communication”, the report reads.

The defence ministry in a statement refuted the U.S. assessment, saying “China is not doing any military expansion and does not seek a sphere of influence”. Pakistan has also emerged as the biggest market for Chinese arms exports, a focus area in Beijing’s expansion plans, the report titled “Military and Security Developments Involving the People’s Republic of China 2017″, said. He harshly criticized China’s construction in the South China Sea and became the first member of President Donald Trump’s cabinet to lay out a comprehensive strategy on Asia. That region accounted for almost half of China’s over $20 billion in arms exports from 2011 to 2015.

Countries including Pakistan and Afghanistan welcome it as a path out of poverty. “To support this modernisation, China uses a variety of methods to acquire foreign military and dual-use technologies, including cyber theft, targeted foreign direct investment and exploitation of the access of private Chinese nationals to such technologies”, the report said.

Regarding the Senkaku Islands, a group of East China Sea islets controlled by Japan but claimed by the mainland and Taiwan, the Pentagon said that previous year Beijing continued to use law-enforcement ships and aircraft to “patrol” near the islands in an attempt to undermine Japan’s administration of them.

China has also always been a strong military, economic, and diplomatic supporter of Pakistan and is considered Islamabad’s largest trade and defense partner.

Senate Hearing to Protect Election Systems from Russia

Posted on June 16, 2017June 16, 2017 by Denise Simon

At least there is a hearing to begin the discussion to harden the software systems related to election processes from further intrusions as 2018 and 2020 approaches.

Russia. Russia is a full-scope cyber actor that will remain a major threat to US Government, military, diplomatic, commercial, and critical infrastructure. Moscow has a highly advanced offensive cyber program, and in recent years, the Kremlin has assumed a more aggressive cyber posture. This aggressiveness was evident in Russia’s efforts to influence the 2016 US election, and we assess that only Russia’s senior-most officials could have authorized the 2016 US election-focused data thefts and disclosures, based on the scope and sensitivity of the targets. Outside the United States, Russian actors have conducted damaging and disruptive cyber attacks, including on critical infrastructure networks. In some cases, Russian intelligence actors have masqueraded as third parties, hiding behind false online personas designed to cause the victim to misattribute the source of the attack. Russia has also leveraged cyberspace to seek to influence public opinion across Europe and Eurasia. We assess that Russian cyber operations will continue to target the United States and its allies to gather intelligence, support Russian decisionmaking, conduct influence operations to support Russian military and political objectives, and prepare the cyber environment for future contingencies.

Furthermore:

Military and Intelligence. Russia aims to improve intelligence collection, missile warning, and military communications systems to better support situational awareness and tactical weapons targeting. Russian plans to expand its imagery constellation and double or possibly triple the number of satellites by 2025. China intends to continue increasing its space-based military and intelligence capabilities to improve global situational awareness and support complex military operations. Many countries in the Middle East, Southeast Asia, and South America are purchasing dual-use imaging satellites to support strategic military activities, some as joint development projects.

Space Warfare. We assess that Russia and China perceive a need to offset any US military advantage derived from military, civil, or commercial space systems and are increasingly considering attacks against satellite systems as part of their future warfare doctrine. Both will continue to pursue a full range of anti-satellite (ASAT) weapons as a means to reduce US military effectiveness. In late 2015, China established a new service—the PLA Strategic Support Force—probably to improve oversight and command of Beijing’s growing military interests in space and cyberspace. Russia and China remain committed to developing capabilities to challenge perceived adversaries in space, especially the United States, while publicly and diplomatically promoting nonweaponization of space and “no first placement” of weapons in space. Such commitment continues despite ongoing US and allied diplomatic efforts to dissuade expansion of threats to the peaceful use of space, including international engagements through the UN.

Counterspace Weapons. The global threat of electronic warfare (EW) attacks against space systems will expand in the coming years in both number and types of weapons. Development will very likely focus on jamming capabilities against dedicated military satellite communications (SATCOM), Synthetic Aperture Radar (SAR) imaging satellites, and enhanced capabilities against Global Navigation Satellite Systems (GNSS), such as the US Global Positioning System (GPS). Blending of EW and cyber-attack capabilities will likely expand in pursuit of sophisticated means to deny and degrade information networks. Chinese researchers have discussed methods to enhance robust jamming capabilities with new systems to jam commonly used frequencies. Russia intends to modernize its EW forces and field a new generation of EW weapons by 2020. Iran and North Korea are also enhancing their abilities to disrupt military communications and navigation.

Some new Russian and Chinese ASAT weapons, including destructive systems, will probably complete development in the next several years. Russian military strategists likely view counterspace weapons as an integral part of broader aerospace defense rearmament and are very likely pursuing a diverse suite of capabilities to affect satellites in all orbital regimes. Russian lawmakers have promoted military pursuit of ASAT missiles to strike low-Earth orbiting satellites, and Russia is testing such a weapon for eventual deployment. A Russian official also acknowledged development of an aircraft-launched missile capable of destroying satellites in low-Earth orbit. Ten years after China intercepted one of its own satellites in low-Earth orbit, its ground-launched ASAT missiles might be nearing operational service within the PLA. Both countries are advancing directed energy weapons technologies for the purpose of fielding ASAT systems that could blind or damage sensitive space-based optical sensors. Russia is developing an airborne laser weapon for use against US satellites. Russia and China continue to conduct sophisticated on-orbit satellite activities, such as rendezvous and proximity operations, at least some of which are likely intended to test dual-use technologies with inherent counterspace functionality. For instance, space robotic technology research for satellite servicing and debris-removal might be used to damage satellites. Such missions will pose a particular challenge in the future, complicating the US ability to characterize the space environment, decipher intent of space activity, and provide advance threat warning.

In 2017, Russia is likely to be more assertive in global affairs, more unpredictable in its approach to the United States, and more authoritarian in its approach to domestic politics. Emboldened by Moscow’s ability to affect battlefield dynamics in Syria and by the emergence of populist and more pro-Russian governments in Europe, President Vladimir Putin is likely to take proactive actions that advance Russia’s great power status.

Putin will seek to prevent any challenges to his rule in the runup to presidential elections scheduled for 2018. Putin remains popular at home, but low turnout in the Duma elections in 2016 and sustained economic hardship will probably enhance Putin’s concerns about his ability to maintain control. Putin is likely to continue to rely on repression, state control over media outlets, and harsh tactics to control the political elite and stifle public dissent.

Russia is likely to emerge from its two-year recession in 2017, but the prospects for a strong recovery are slim. Russia is likely to achieve 1.3 percent GDP growth in 2017 and 1.7 percent in 2018, according to commercial forecasts. Putin has long sought to avoid structural reforms that would weaken his control of the country and is unlikely to implement substantial reforms before the presidential elections.

We assess that Russia will continue to look to leverage its military support to the Asad regime to drive a political settlement process in Syria on its terms. Moscow has demonstrated that it can sustain a modest force at a high-operations tempo in a permissive, expeditionary setting while minimizing Russian casualties and economic costs. Moscow is also likely to use Russia’s military intervention in Syria, in conjunction with efforts to capitalize on fears of a growing ISIS and extremist threat, to expand its role in the Middle East.

We assess that Moscow’s strategic objectives in Ukraine—maintaining long-term influence over Kyiv and frustrating Ukraine’s attempts to integrate into Western institutions—will remain unchanged in 2017. Putin is likely to maintain pressure on Kyiv through multiple channels, including through Russia’s actions in eastern Ukraine, where Russia arms so-called “separatists. Moscow also seeks to undermine Ukraine’s fragile economic system and divided political situation to create opportunities to rebuild and consolidate Russian influence in Ukrainian decisionmaking.

Moscow will also seek to exploit Europe’s fissures and growing populist sentiment in an effort to thwart EU sanctions renewal, justify or at least obfuscate Russian actions in Ukraine and Syria, and weaken the attraction of Western integration for countries on Russia’s periphery. In particular, Russia is likely to sustain or increase its propaganda campaigns. Russia is likely to continue to financially and politically support populist and extremist parties to sow discord within European states and reduce popular support for the European Union. More here from ODNI.

Emoluments Clause v. Donald Trump, Expanded Investigation

Posted on June 15, 2017June 16, 2017 by Denise Simon

Update: June 16, 2017, 1:07 pm, est. One of President Trump’s own lawyers, Michael Cohen has now hired a lawyer, Stephen M. Ryan. Cohen apparently has agreed to testify before the House Intelligence Committee on September 5. Additionally, Michael Caputo, the White House advisor hired by Paul Manafort has been contacted by the FBI and too has hired a lawyer, Dennis Vacco. Vacco is a former New York state attorney general. Vice President Pence has hired a Virginia attorney, Richard Cullen.

Don’t shoot the messenger, this is merely an attempt to further explain the expanded Special Counsel Robert Mueller investigation into President Trump and others on his team. There is a multi-track investigation that has been launched by the Mueller team in addition to a multi-track investigation being performed by the Senate Judiciary Committee, which does include Loretta Lynch.

This post is an attempt to offer information on the other moving parts for some additional clarity.

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Emoluments Clause

No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.

Article I, Section 9, Clause 8

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almost 200 Democratic members of Congress to be filed against President Trump for violations of the “Foreign Emoluments Clause” of the Constitution. This is on top of another Emoluments Clause lawsuit brought by Maryland and D.C. earlier this week. The general theory is that under the Constitution, the President has an obligation to insulate himself from any foreign influence that would come in the shape of gifts or profits, and that the kinds of profits President Donald Trump receives through his international corporation are precisely the kind that violate such an obligation. In other words, presidents can’t take bribes, and doing business with foreign governments and large foreign companies is something of a bribe per se. Another similar case, CREW v. Donald J. Trump, was filed three days after the inauguration and is currently awaiting a response to Trump’s motion to dismiss in the Southern District of New York (that case is proceeding before Judge Ronnie Abrams, sister of LawNewz founder Dan Abrams).

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The Hill reports in part that Mueller is investigating the finances and business dealings of Kushner as well as other Trump associates.Those being looked into include former national security adviser Michael Flynn, former campaign chairman Paul Manafort and Carter Page, another campaign adviser to Trump.

“We do not know what this report refers to,” Jamie Gorelick, Kushner’s lawyer, told the newspaper.

“It would be standard practice for the Special Counsel to examine financial records to look for anything related to Russia. Mr. Kushner previously volunteered to share with Congress what he knows about Russia-related matters. He will do the same if he is contacted in connection with any other inquiry.”

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There is have significant pushback by the Trump White House and several outside advisors to Trump including Laura Ingraham, Sean Hannity, Newt Gingrich and recently hired by Trump, Jay Sekulow. All of these people are correct to earnestly object to continuing investigations with regard to the Russian election intrusion and Trump, at least it appears to be the case and former FBI Director James Comey noted several times.

However, the expanded track of the Mueller investigation team also goes to the financial realm which does include financial corruption, money laundering, public corruption, organized crime and violations of the False Claims Act.

Sounds creepy for sure. There is evidence in this area and the Mueller investigation is not exclusive to finding guilt, but also to eliminate guilt and intent. All investigations include those two conditions and it requires repeating. We cannot know in full what President Trump or those on his team fully revealed financially on paper which is required as a government employee and for security clearance purposes.

Those items are remain undisclosed at this time in open source, however in a classified or undisclosed condition, all financial traces are being requested, gathered and examined by experts.

It should be noted here that additional names could be added to the list under the expanded investigation.

Mueller was named to be special counsel by Deputy Attorney General Rod Rosenstein and Mueller has mobilized and interesting team so far. The backgrounds of the lawyers listed below provide an indication upon which Mueller is taking the investigation.

For your reference, they include:

Aaron Zebley, Former FBI assigned to global terrorism and cyber security

Steve Gaudin, Former FBI interrorgator and al Qaeda expert

James Quarles, Lawyer specializing in corporate and taxation law (Whitewater case)

Jeannine Rhee, Lawyer specializing in public corruption, criminal, securities enforcement

Andrew Weissmann, Former FBI and DOJ, criminal fraud division (Enron case)

Michael Dreeban, Former Solicitor General, criminal law

Lisa Page, FBI lawyer with organized crime, money laundering specialty, Russian/Soviet crime

*** Witness interviews have not begun and the time this article was published and Mueller’s office is located on D Street and has not been fully established. In full disclosure, three people on the Mueller team have previously donated to Democrats while one of the three also made donations to Republicans.

Lisa Page is of particular interest on this team due to her trial record which included on Semion Mogilevich. Several of Mogilevich’s associates own condos in Trump Tower in New York and the former felon and friend of Trump, Felix Sater was a Moglievich lieutenant. Additionally, Andrew Weissmann prosecuted several cases in US District Court in New York of mafia families and their infiltration of Wall Street.

For more details on those of the Mueller team, click here. Of note, this website has published more than one article regarding Felix Sater, Russian oligarch money laundering in the United States and Cyprus connections including documentation from the Panama Papers. The search feature is a useful tool to locate those articles.

At Least 34 Years of Immigration Debate, Loopholes and Dollars

Posted on June 15, 2017June 15, 2017 by Denise Simon

The proposed Department of Justice budget request for 2018 for the Executive Office of Immigration is $421.5 million and includes 2600 employees with 831 lawyers. Judges assigned to immigration courts are being hired, shuffled around the country and have in some areas have a five year base backlog.

Image result for immigration court FoxLatino

The Executive Office for Immigration Review (EOIR) was created on January 9, 1983, through an internal Department of Justice (DOJ) reorganization which combined the Board of Immigration Appeals (BIA or Board) with the Immigration Judge function previously performed by the former Immigration and Naturalization Service (INS) (now part of the Department of Homeland Security). Besides establishing EOIR as a separate agency within DOJ, this reorganization made the Immigration Courts independent of INS, the agency charged with enforcement of Federal immigration laws. The Office of the Chief Administrative Hearing Officer (OCAHO) was added in 1987. In 2013, EOIR observed its 30th anniversary.

EOIR is also separate from the Office of Special Counsel for Immigration-Related Unfair Employment Practices in the DOJ Civil Rights Division and the Office of Immigration Litigation in the DOJ Civil Division.

As an office within the Department of Justice, EOIR is headed by a Director who reports directly to the Deputy Attorney General. Its headquarters are located in Falls Church, Virginia, about 10 miles from downtown Washington, DC.

New York City Law Creates Loophole To Avoid Deporting Criminal Illegal Immigrants

A New York City law that reclassifies several low-level offenses as non-criminal went into effect Tuesday, allowing citizen offenders to keep clean records and illegal immigrant offenders to potentially avoid deportation.

The law, passed by the city council and signed by Mayor Bill de Blasio in 2016, allows police to classify trial summonses for petty crimes as civil summonses, rather than criminal summonses. The change would affect crimes including public urination and drinking and staying in the park after dark, DNA Info reports. The change critically affects the impact of an executive order from President Donald Trump this spring ordering the deportation of illegal immigrants convicted of crimes.

Under the new law, illegal immigrants convicted of these crimes would receive a civil rather than criminal summons, which frees local law enforcement from the obligation of reporting the offender’s immigration status to Immigration and Customs Enforcement (ICE).

The law would affect cases such as Alejandro Luna, a former gang member and an illegal immigrant caught in central park after dark June 5 who now faces deportation. This would be Luna’s second deportation, the first came in 2006 after he was convicted of home-invasion and robbery. He then illegally entered the country again only to be detained on the June 5 park offense. More here.

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Illegals presently have access to government funded healthcare. However:

The ‘Verify First Act’ by Rep. Lou Barletta (R-PA) would subsequently end American taxpayer-funded money going to illegal aliens in the form of healthcare insurance credits. The plan is being supported by NumbersUSA, a group which has staunchly advocated for Trump’s America First agenda.

“We applaud Rep. Lou Barletta for introducing the Verify First Act to ensure that illegal aliens cannot qualify for taxpayer-funded health insurance credits,” NumbersUSA Peter Robbio said in a statement. “We are grateful that the Ways and Means Committee and House Republican Leadership agreed to move this important bill forward.”

Since Obamacare’s enactment, illegal immigrants received more than $700 million in healthcare insurance credits by 2015, according to the Senate Committee on Homeland Security and Governmental Affairs.

In Barletta’s plan, healthcare insurance recipients through the American Health Care Act (AHCA) would have their citizenship and immigration statuses verified by the Social Security Administration (SSA) and the Department of Homeland Security (DHS). More here.

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In part: Traditional sanctuary policies are often described as falling under one of three categories. First, so-called “don’t enforce” policies generally bar the state or local police from assisting federal immigration authorities. Second, “don’t ask” policies generally bar certain state or local officials from inquiring into a person’s immigration status. Third, “don’t tell” policies typically restrict information sharing between state or local law enforcement and federal immigration authorities. This report provides examples of various state and local laws and policies that fall into one of these sanctuary categories. The report also discusses federal measures designed to counteract sanctuary policies. For instance, Section 434 of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) and Section 642 of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) were enacted to curb state and local restrictions on information sharing with federal immigration authorities.

State or local measures limiting police participation in immigration enforcement are not a recent phenomenon. Indeed, many of the recent “sanctuary”-type initiatives can be traced back to

activities carried out by churches that provided refuge—or “sanctuary”—to unauthorized Central American aliens fleeing civil unrest in the 1980s.13 A number of states and municipalities issued declarations in support of these churches’ actions.14 Others went further and enacted more substantive measures intended to limit police involvement in federal immigration enforcement activities.15 These measures have included, among other things, restricting state and local police from arresting persons for immigration violations, limiting the sharing of immigration-related information with federal authorities, and barring police from questioning a person about his or her immigration status.16

Still, there is no official definition of a “sanctuary” jurisdiction in federal statute or regulation.17 Broadly speaking, sanctuary jurisdictions are commonly understood to be those that have laws or policies designed to substantially limit involvement in federal immigration enforcement activities,18 though there is not necessarily a consensus as to the meaning of this term.19 Some jurisdictions have self-identified as sanctuary cities.

The federal government’s power to regulate immigration is both substantial and exclusive.23 This authority is derived from multiple sources, including Congress’s Article I powers to “establish a uniform Rule of Naturalization” and “regulate commerce with foreign nations, and among the several states,”24 as well as the federal government’s “inherent power as a sovereign to conduct relations with foreign nations.”

The Supreme Court’s 2012 ruling in Arizona v. United States—which invalidated several Arizona laws designed “to discourage and deter the unlawful entry and presence of aliens and economic activity by persons unlawfully present in the United States”28 as preempted by federal law—reinforced the federal government’s pervasive role in creating and enforcing the nation’s immigration laws.29 “The Government of the United States,” the Court said, “has broad, undoubted power over the subject of immigration and the status of aliens.”30

Yet despite the federal government’s sweeping authority over immigration, the Supreme Court has cautioned that not “every state enactment which in any way deals with aliens is a regulation of immigration and thus per se preempted” by the federal government’s exclusive power over immigration.39 Accordingly, in Arizona the Supreme Court reiterated that, “[i]n preemption analysis, courts should assume that the historic police powers of the States are not superseded unless that was the clear and manifest purpose of Congress.”40 For example, in Chamber of Commerce of the U.S. v. Whiting, the Supreme Court upheld an Arizona law—related to the states’ “broad authority under their police powers to regulate the employment relationship to protect workers within the State”41—that authorized the revocation of licenses held by state employers that knowingly or intentionally employ unauthorized aliens.42 Even though the Immigration Reform and Control Act of 1986 (IRCA) expressly preempted “any State or local law imposing civil or criminal sanctions … upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens,” the Supreme Court concluded that Arizona’s law fit within IRCA’s savings clause for state licensing regimes and thus was not preempted.43

Accordingly, based on current jurisprudence, federal measures that impose direct requirements on state or municipal authorities appear most likely to withstand an anti-commandeering challenge if they (1) are not directed at a state’s regulation of the activities of private parties; and (2) apply to the activities of private parties as well as government actors.

Finally, Congress does not violate the Tenth Amendment when it uses its broad authority to enact legislation for the “general welfare” through its spending power,62 including by placing

conditions on funds distributed to the states that require those accepting the funds to take certain actions that Congress otherwise could not directly compel the states to perform.63 However, Congress cannot impose a financial condition that is “so coercive as to pass the point at which ‘pressure turns into compulsion.’”64 For example, in National Federation of Independent Business v. Sebelius, the Supreme Court struck down a provision of the Patient Protection and Affordable Care Act of 2010 (ACA) that purported to withhold Medicaid funding to states that did not expand their Medicaid programs.65 The Court found that the financial conditions placed on the states in the ACA (withholding all federal Medicaid funding, which, according to the Court, typically totals about 20% of a state’s entire budget) were akin to “a gun to the head” and thus unlawfully coercive.66

violations of federal immigration law may be criminal or civil in nature, with alien removal understood to be a civil proceeding.71 Some immigration-related conduct potentially constitutes a removable offense and also may be subject to criminal sanction. For example, an alien who knowingly enters the United States without authorization is not only potentially subject to removal,72 but could also be charged with the criminal offense of unlawful entry.73 Other violations of the INA are exclusively criminal or civil in nature. Notably, an alien’s unauthorized immigration status makes him or her removable, but absent additional factors (e.g., having reentered the United States after being formally removed),74 unlawful presence on its own is not a criminal offense.

Some jurisdictions have adopted measures that restrict or bar police officers from making arrests for violations of federal immigration law. In some jurisdictions restrictions prohibit police from detaining or arresting aliens for civil violations of federal immigration law, like unlawful presence.75 Other jurisdictions prohibit police from making arrests for some criminal violations of federal immigration law, like unlawful entry.76 Still others prohibit assisting federal immigration authorities with investigating or arresting persons for civil or criminal violations of U.S. immigration laws.77 And some other jurisdictions have prohibitions that are broader in scope, such as a general statement that immigration enforcement is the province of federal immigration authorities, rather than that of local law enforcement.

Some states and localities have restricted government agencies or employees from sharing information with federal immigration authorities, primarily to prevent federal authorities from using the information to identify and apprehend unlawfully present aliens for removal.88 For instance, some jurisdictions prohibit law enforcement from notifying federal immigration authorities about the release status of incarcerated aliens, unless the alien has been convicted of certain felonies.89 Similarly, other jurisdictions prohibit their employees from disclosing information about an individual’s immigration status unless the alien is suspected of engaging in illegal activity that is separate from unlawful immigration status.90 Some jurisdictions restrict disclosing information except as required by federal law91—sometimes referred to as a “savings clause”—although it appears that the Department of Justice has interpreted those provisions as conflicting with federal information-sharing provisions. For the full summary and context with access to footnotes, go here.