• Show Notes
  • Transcript

On this episode of United Security, “The Double-Edged Sword of Tech,” Lisa Monaco and Ken Wainstein break down politically charged national security issues making the headlines, including: 

  • The new revelations unearthed by Volume 5 of the Senate Select Committee on Intelligence’s final report. 
  • Concerns about cryptocurrency as a method of terrorist financing, as highlighted by the Justice Department’s largest-ever seizure of cryptocurrencies last week.
  • The policy considerations and legal authorities associated with President Trump’s decision to ban Tiktok and WeChat by executive orders. 
  • The arrest of media tycoon Jimmy Lai and the troubling enforcement of Hong Kong’s new national security law.

REFERENCES AND SUPPLEMENTAL MATERIALS: 

VICE PRESIDENTIAL VETTING PROCESS: 

  • Michael Scherer, “Inside Biden’s unusual VP pick process: Tough questions, 11 finalists and many lawyers,” Washington Post, 8/11/2020
  • Matt Viser, “Joe Biden announces team that will lead his vice-presidential selection process,” Washington Post, 4/30/2020
  • Juliet Lapidos, “Vetting Vet,” Slate, 9/3/2008

RUSSIA ELECTION INTERFERENCE:

  • Updated Statement by Director of National Counterintelligence and National Security Center William Evanina, Office of the Director of National Intelligence, 8/7/2020
  • “Statement by NCSC Director William Evanina: 100 Days Until Election 2020,” DNI.gov, 7/24/2020
  • Report of the Senate Select Committee on Intelligence on Russian Active Measures Campaigns and Interference in the 2016 U.S. Election, Volume 5: Counterintelligence Threats and Vulnerabilities,” 8/18/2020
  • Josh Rudolph and Thomas Morley, “Covert Foreign Money: Financial Loopholes Exploited by Authoritarians to Fund Political Interference in Democracies,” German Marshall Fund, 8/18/2020
  • Mark Hosenball, “U.S. Senate committee concludes Russia used Manafort, WikiLeaks to boost Trump in 2016,” Reuters, 8/18/2020

CRYPTOCURRENCY

  • Indictment “Global Disruption of Three Terror Finance Cyber-Enabled Campaigns,” Department of Justice, 8/13/2020
  • Devlin Barrett, “U.S. seizes millions in cryptocurrency meant for terror groups, Justice Dept. says,” Washington Post, 8/13/2020
  • Sharon LaFraniere and Julian E. Barnes, “Report Details Manafort’s Ties During 2016 Trump Campaign to a Russian Agent,” New York Times, 8/18/2020
  • Jason Brett, “Between Crypto, Libra, Stablecoins, And Digital Dollars, Congress Introduced 35 ‘Blockchain’ Bills,” Forbes, 8/17/2020
  • Billy Bambraugh, “A Massive Bitcoin Flash Crash Just Created $1 Billion Of Crypto Chaos,” Forbes, 8/2/2020

TIK TOK AND WECHAT EXECUTIVE ORDERS 

  • “Executive Order on Addressing the Threat Posed by TikTok,” WhiteHouse.gov, 8/6/2020
  • “Executive Order on Addressing the Threat Posed by WeChat,” WhiteHouse.gov, 8/6/2020
  • “Executive Order on Securing the Information and Communications Technology and Services Supply Chain,” WhiteHouse.gov, 5/17/2019
  • Ana Swanson, “Trump’s Orders on WeChat and TikTok Are Uncertain. That May Be the Point,” New York Times, 8/7/2020
  • Raymond Zhong, “How TikTok’s Owner Tried, and Failed, to Cross the U.S.-China Divide,” New York Times, 8/3/2020
  • Nitish Pahwa, “What Indians Lost When Their Government Banned TikTok,” Slate, 8/7/2020
  • Nandita Bose, “U.S. Senate votes to ban TikTok app on government devices,” Reuters, 8/6/2020
  • Russell Brandom, “The biggest problem with Microsoft’s fractured TikTok deal,” The Verge, 8/4/2020
  • Donie O’Sullivan, “Trump’s campaign was trolled by TikTok users in Tulsa,” CNN, 6/21/2020
  • Elena Chatchko, “Could the TikTok and WeChat Executive Orders Undermine IEEPA?,” Lawfare, 8/8/2020
  • Executive Order No. 12170, “Blocking Iranian Government Property,” Treasury.gov, 11/14/1979
  • Edward Walsh and John Goshko, “The Freeze,” Washington Post, 11/15/1979

HONG KONG AND JIMMY LAI

  • Helen Davidson and Lily Kuo, “Hong Kong media tycoon Jimmy Lai arrested under new security law,” Guardian, 8/10/2020
  • Elaine Pearson, “What Jimmy Lai’s Arrest Means,” Human Rights Watch, 8/12/2020
  • Jiayang Fan, “China’s Arrest of a Free-Speech Icon Backfires in Hong Kong,” The New Yorker, 8/14/2020
  • “The International Emergency Economic Powers Act: Origins, Evolution, and Use,” Congressional Research Service, 7/14/2020
  • Joseph Kahn, “Yahoo helped Chinese to prosecute journalist,” New York Times, 8/9/2005

CLIPS: 

  • Democrats Spotlight “The Rising” at Democratic National Convention, DNC Website, 8/17/2020
  • ABC News Coverage of the Iran Hostage Crisis, YouTube, 11/14/1979
  • President Trump on TikTok Sale, C-SPAN, 8/3/2020
  • President Trump on Jimmy Lai’s Arrest, YouTube, 8/13/2020
  • Congressman Tom Lantos Chairs House Foreign Affairs Hearing on Yahoo’s Role in Shi Tao’s Imprisonment, C-SPAN, 11/7/2007

Lisa Monaco:                From CAFE, this is United Security. I’m Lisa Monaco.

Ken Wainstein:             I’m Ken Wainstein.

Lisa Monaco:                Hey, good morning, Ken Wainstein.

Ken Wainstein:             Good morning. Good to see you.

Lisa Monaco:                How are you doing? Oh, good to see you via Zoom.

Ken Wainstein:             It’s all going well. Enjoying, keeping an eye on what’s going on. Watching the Democratic Convention.

Lisa Monaco:                So how have you been? Have you been tuned in?

Ken Wainstein:             I have been.

Lisa Monaco:                It’s must see TV, right?

Ken Wainstein:             It really is. I actually didn’t expect much. This applies to both conventions because of the virtual context. I was worried that it would be flat. It wouldn’t have the grand juror of the big inventions. Look, that is the case. Especially because of the VP announcement, that had some suspense. So there’s some excitement around that, but also I just think it’s actually gone fairly well.

We’ve actually had some substantive statements by people that have been important. The best thing is the Montage Musical of The Rising of Bruce Springsteen, which of course just makes me happy just thinking about it.

Lisa Monaco:                Talk about the most predictable from you and me commentary and the most uncontroversial, which is huge kudos for the organizers getting, but a rising montage in that video that opened it up. That was terrific.

(singing)

Ken Wainstein:             Yeah, and not to talk bad about our organizers, but I do recall that you and I had one particular request when they asked us to do this podcast. We said, we’d do it if they could arrange with Bruce Springsteen that we could use The Rising as our music name and they completely failed. They just had to make one phone call to Bruce. That’s all we asked.

Lisa Monaco:                Yeah, exactly. Huge whiff on that request.

Ken Wainstein:             I’m not sure why Joe Biden was able to do it.

Lisa Monaco:                But I do love our music. The composer did a great job on that.

Ken Wainstein:             Yeah, we have great music.

Lisa Monaco:                My only other comment on the convention organizing, I know nothing about organizing a convention and even less about doing one virtually, but it’s made for some really interesting watching. Although, some of the video montages of people clapping from their couch is bullocks, really awkward.

Ken Wainstein:             Well, you got to make two, I guess.

Lisa Monaco:                Yeah, exactly.

Ken Wainstein:             But I think it’s been good. So that’s what I’ve been doing besides other really stimulating, exciting things like filling out time sheets from my law firm practice and that thing. Much more exciting than the things that you’ve been doing, I think. So much more mundane things like helping to select the candidate for the next Vice President of United States, the whole things like that.

Lisa Monaco:                Yeah. Well, you’re referring to what’s it’s been publicly announced that I was one of the people involved in coordinating the vetting process for the vice president selection, Senator Kamala Harris as the Vice President now, official vice presidential nominee for the Democratic ticket. So yeah, it was lots and lots of work and lots and lots of lawyers involved. Ken, no surprise.

Ken Wainstein:             No surprise, is DC. Lots of lawyers.

Lisa Monaco:                Yeah.

Ken Wainstein:             So look, I know you can’t talk about that particular process that you went through, but maybe just for our listeners sake just go through what is a vetting process as it relates to the vice-presidential candidate.

Lisa Monaco:                So Ken, you’re right. I can’t talk about the specific process we went through or anything about that in terms of who was vetted and any of that process or who was involved, but it might be interesting for people to understand what is vetting, just taken out of the context of the vice presidential race?

It’s a weird word actually, when you think about it, but it really just means scrutiny and evaluating somebody for a particular job or role. So anybody who applies for a job get some form of vetting. I think everyone can relate to that. But the bigger, the job, the more public the role, the more detailed the scrutiny.

You and I both went through vetting because we held positions of presidential appointments where we went through the Senate confirmation process. So that’s a form of vetting. But I think one of the things for folks to understand is, it’s gotten a lot of attention and vice-presidential context, but there’s a legal aspect to it and a political aspect to it.

The legal aspect is really what’s considered the vetting piece. That’s why there’s lots of lawyers involved. It’s done by lawyers because it’s really a detailed investigation of somebody’s background from their educational background, did they in fact go to school at the places they said they went to school, did they earn the degrees they said that they earned. Obviously things like criminal history, affiliations, potential conflicts of interest with the role that a person might have.

So you’re looking for anything that’s obviously disqualifying for a role. So somebody who wants to be a federal judge, probably not going to be somebody who’s had a criminal conviction, but more broadly than that, you’re also looking for issues or vulnerabilities that are going to help inform the ultimate decision maker about that job or that role in evaluating the person’s suitability for the role.

How does their background and everything you find in the vetting process inform or reflect on that person’s judgment, their decision making, their ethics, the rigor that they would apply to whatever job they’re being considered for.

Ken Wainstein:             You’re also looking for things that might be exploited politically. There might be things in a person’s background and you can vet with opposition research, being what it is these days, adversaries are going to find these things and want to exploit them. So that goes to something that might not be disqualifying, but that you just want to know about in assessing whether a particular person should or shouldn’t be the candidate.

Lisa Monaco:                Sure. Although I’d say, when you and I went through vetting, I’m sure people were looking for the same stuff on us, right?

Ken Wainstein:             Right, look for the clerical position, right.

Lisa Monaco:                Although I’m happy to vouch for the fact that you are indeed trustworthy.

Ken Wainstein:             Well, thanks.

Lisa Monaco:                Although I took no part in your vet for when you were appointed.

Ken Wainstein:             You’re not going to take blame for that.

Lisa Monaco:                No, exactly.

Ken Wainstein:             Well look, kudos on the process. We’re not going to comment one way or the other about the outcome of the process, but the fact that it was a completely buttoned up process, that there was no leak. That’s a tough thing to do in this day and age and kudos to you and your colleagues for doing that.

Lisa Monaco:                As you can see, I’m maintaining that streak by not giving you any information about the particular process.

Ken Wainstein:             I’m very frustrated. I should’ve given you a few drinks before the podcast.

Lisa Monaco:                Yeah, it’s my goal in life to frustrate you on these things, Ken.

Ken Wainstein:             Okay. So let’s move on to the first news topic of the day. So last time we talked about an announcement that had been issued not long before the last podcast, by a Bill Evanina, who’s the Director of the National Counterintelligence and Security Center. He made a fairly sparse statement about the threats that might be looming in relation to the upcoming election. He talked about the threat of foreign interference from Iran, Russia, and China. As we discussed, it was a very sparse report-

Lisa Monaco:                I’ll say, Ken, your sparse, I think is generous. As I recall, some critics said it was so general as to be meaningless.

Ken Wainstein:             It was, it was not only sparse on specifics and details, it didn’t give readers, i.e., the US, the American public an understanding of what the hierarchy of threat was. You had Iran, China and Russia, all discuss on a par and keeping in mind that what the purpose of that statement was, which is basically to give the American people what’s called a defensive briefing.

That’s a term I think we’ve used before, but that’s when the intelligence community identifies the US person who might be a target of influence efforts or intelligence efforts by a foreign government. They’ll go to that person and say, “Hey, we want you to know somebody might be trying to compromise you. Somebody in the Russian service might be trying to get you to give secrets,” or what have you, that’s called the defensive briefing.

So the purpose of this statement was to basically give the US, the American public a defensive briefing. So as we head toward the presidential elections, you used to understand that these are the efforts being made by foreign adversaries to try to shape public opinion. So be vigilant to that. To the extent that that was the purpose. I think critics said that that initial statement was woefully inadequate.

Lisa Monaco:                It landed with a thud. It got a lot of criticism for not really telling anybody anything that wasn’t already apparent. As you say, for lumping Russia, China, and Iran all together. So fast forward to August 7th. They must’ve been polishing this next statement, right when you and I were doing our last podcast. Because the next statement that Bill Evanina and the intelligence community issued happened on August 7th, the day after we were talking about this.

In that statement, it seemed to me, it read, like trying to take another swing at the whole effort. The next statement seemed to be responding to the criticisms that he got for not really putting much meat on the bones with the first statement. It did go a little further. It said that Russia was using measures primarily to denigrate Vice President Biden in the election. So it made a forward-leaning statement in that sense.

But it also said something about China. It said that China was hoping that Trump will lose, It specifically said that China prefers that President Trump, who Beijing sees as unpredictable, according to the statement. It says that China prefers that Trump doesn’t win reelection.

So I think a lot of people were scratching their head on that statement to say, “Well, where’s the beef?” So to speak, “Where’s the backup for that statement?” It seemed pretty convenient too, because of course, President Trump has made a lot of statements about his view and his assertion that China prefers Vice President Biden.

So this next statement, the subsequent statement, while it had more information in it, more words on the page it, I think met with a lot of consternation as well. But I don’t know, what was your take on that second statement?

Ken Wainstein:             I give them credit for providing more information and specifically for acknowledging that the evidence or the intelligence suggests that Russia is involved in these efforts. The efforts by Russia are designed to denigrate Vice President Biden. Because obviously that’s been a major issue historically as to the 2016 election as to whether Russia was trying to denigrate recruitment and whether your favorite President Trump.

The problem I see with this is once again, the purpose is to try to really notify the American people with specificity as to the threat that they’re facing and the influence that they might be subject to. The reality is, Russia is like major leagues in this effort. They’re the big boys. We saw that in 2016, we’ve seen that in their efforts against a lot of the Western European countries over the last few years, against the old Soviet Satellite States where they’ve been honing their skills in this area.

China, obviously, I’m not dismissing China as a threat. Obviously, as we discussed last time, China was hacking into the campaigns back in 2008 and you and I were both involved in making sure that campaigns got briefed about that threat. But that was an information gathering effort.

China emphasis historically been more focused on stealing intellectual property. While I’m sure they are involved in these influence efforts, I think the reality that the intelligence, not being in Southern Intelligence Communities that Russia is the big player there. In fact, there was a recent report by a think tank, the German Marshall Fund Think Tank that, in terms of $300 million that had been spent by authoritarian regimes, of which both China and Russia are included. 82% of the money that was devoted to trying to inappropriately influence foreign elections was spent by Russia.

That suggests to me that really a complete recitation of the facts underlying the threat would highlight Russia, highlight Russia’s designs. Also, I think there’s more intelligence out there that hopefully could be sufficiently sanitized to protect sources and methods that could be laid out for American people to see how Russia is going about doing this.

In this statement from Evanina, they site a Ukrainian official who was spreading claims about corruption on the part of Joe Biden, as evidence of Russia’s efforts to denigrate Joe Biden. I’m quite confident there’s much more direct Russia role in that effort.

Lisa Monaco:                Look, I think, unfortunately, we are in a era where sometimes it seems like the intelligence community is damned if it does and damned if it doesn’t, right?

Ken Wainstein:             Absolutely.

Lisa Monaco:                My first reaction when I read the second statement from Evanina and intelligence community was, “All right, this is a response to the criticism they got on the previous statement.” That’s a difficult position to be in, to look like you’re responding to political critics and that’s never a good place. But as you scrutinize what was in the statement, as you said, it’s very hard to square on the record that we have to really have Russia, China, and Iran all lumped together.

So you’ve got, on the one hand, this voluminous record of their efforts, their tactics, very specifically laid out both in the Mueller report now in volumes by the Senate Intelligence Community. Then, you really just have talk about sparse. No record of China’s efforts in this regard.

I should say, I don’t know what we don’t know. We haven’t seen that evidence or that intelligence put forward as to what China might be doing or what Iran might be doing. But in the absence of that, it makes one wonder why they’re being all lumped together and not really delineated more clearly as to how we should be thinking about these.

Ken Wainstein:             Yeah, and you use the word voluminous. That takes us to volume five of the Senate Intelligence Committees report on the 2016 election and the interference thereof that is the output of their multi-year investigation. It’s 966 pages. I know at least in your spare time, you’ve read every one of them.

Lisa Monaco:                When I’m done it will form a great doorstop. I joke, it’s actually an impressive piece of work. It’s pretty blockbuster report, when you think about it. This investigation has been three years running. I think over 200 interviews of current and former officials, including, yours truly. We can talk about that since that’s been made public in the report.

The Intelligence Committee interviewed current officials like Jared Kushner, Steve Bannon, former official Donald Trump Jr., and others, and of course, former Obama officials, as I said, including myself, Susan Rice, Denis McDonough, Jeh Johnson, John Brennan, Jim Clapper, all of that has now been part of the public record.

Ken Wainstein:             Yeah, and they find that there’s a significant effort by the Russians to try to influence our election. They found that there were contacts with the Trump campaign that raised serious counter-intelligence concerns. They, on a bipartisan basis, found that this was an aggressive effort by the Russians to disrupt our election similar to what the Mueller investigation found.

Then you had separate findings by Democratic Committee Members and the Republican Committee Members as to the question of whether there was, “collusion” between the campaign and the Russians. Of course, that’s been the major issue as to whether there was any active participation by the campaign, in any way to facilitate this interference effort.

Different views on that. Predictably, the Republicans have of the fact that there was no evidence. They found no evidence to substantiate that. Democrats looked at the same evidence and said that they found a significant indicia of coordination between, in particular Manafort and a colleague of his who, he was very close to. Who actually was a member of Russian intelligence. They see that differently.

But in terms of the actual report itself, a good bipartisan effort and finding about the severity of what the Russians are trying to do. If I could just give a shout out to the Senate Intelligence Committee. I represented, as you mentioned, John Brennan, Jim Clapper, and David Cohen, who is the deputy director of the CIA in their appearances before the Senate Intelligence Committee. It was a joy dealing with him. It always has been-

Lisa Monaco:                As somebody who was a witness, and on the interviewing side of both the staff and the members, I’m not sure I’d say it was a pleasure-

Ken Wainstein:             Pleasure, relatively speaking.

Lisa Monaco:                Right. Exactly. I have a few takeaways from this final installment of the report. There was, I think, really important conclusions and facts, I should say, facts laid out about Paul Manafort, about WikiLeaks, and importantly, particularly because of the moment we’re in now, just a few months before an election and a transition, a potentially a transition, there was some really interesting, I think, facts laid out about how the transition was handled in 2016.

So maybe you take a minute just to unpack some of those takeaways. I think big issue that they found was that Paul Manafort, of course, the former Trump Campaign Chair, of who was later dismissed from that job, but remained in the Trump orbit. He was, of course, Paul Manafort people will call, was convicted as bank and tax fraud. He ultimately pled guilty to conspiracy against the United States and obstruction of justice.

The committee concluded that Manafort was working with a guy named Konstantin Kilimnik. Now, this is a guy who the committee identified as a Russian Intelligence Officer. That’s a difference from the Mueller report. The Mueller report did not ultimately state that as plainly. The committee said Kilimnik was a Russian Intelligence Officer. He was working with Manafort, Manafort sought to share campaign information, including sensitive polling data with Kilimnik.

So that was a big conclusion and set of facts laid out by the committee in this report. The committee also said that there was some information suggesting that Kilimnik may have been connected to the Russian pack in 2016 of the Democratic National Committee.

So that’s a blockbuster headline coming out of this committee report that the bipartisan portion of the report also said that Manafort’s role on the campaign. This is a quote, which really struck me, “Represented a grave counterintelligence threat.” That’s a pretty stark statement from a bipartisan Senate Committee.

But the second thing that really struck me about the report was that they concluded that Trump and senior campaign officials sought advanced information on the WikiLeaks dumps of emails and that they sought that information through Roger Stone. That Trump actually spoke to Stone about WikiLeaks, even though Trump, in his written responses to Special Counsel Mueller and his team, Trump said he had no recollection of such discussions. So it was pretty clear that the committee was calling BS on that for lack of a better word.

Then finally, and this I think is really important for the current moment they were in, the committee and report said that, and they said this very, very plainly, the Russians took advantage of the Trump transition team. Again, this is in 2016. Their relative inexperience and opposition to Obama policies in order to, “pursue unofficial channels.” This is Russia trying to exploit the Trump transition team to their own advantage.

The report specifically calls out the need for, in the future, to be more diligent about guarding against Russian interference during a transition period. So again, as we’re 75 days out from a presidential election, I think that’s a really, really instructive thing.

The bottom line, I think from my perspective is, this was a bipartisan report. In the main, we should mention that there were two appendices, one for separate Republican views and separate Democratic views. But the ultimate findings, from this volume of the Senate Intelligence Report and the Mueller report are strikingly similar.

The Senate Intel Report, this fifth volume, says the Russian government engaged in aggressive multifaceted effort to influence or attempt to influence the outcome of the 2016 presidential election. Mueller, of course, in this much quoted line from his report said the Russian government interfered in the 2016 presidential election in sweeping and systematic fashion. So bottom line, you’ve got two of the same conclusion.

Ken Wainstein:             Moving on. Let’s look at something else that caught my attention, which is the report from last week that the justice department had filed charges and seized millions of dollars of cryptocurrency that was being used to fund terrorist groups from Al-Qaeda to ISIS, to the note and arm or military arm of Hamas.

Come around, because this is traditional terrorist financing, which is the thing that investigation and prosecution that we did extensively after 9/11 and as a major way of trying to disrupt and dismantle terrorist groups. But it’s a terrorist financing case with the new twist, the new modern twist of cryptocurrency, interesting case.

Lisa Monaco:                Yeah, it caught my eye because it was announced by our former division, the National Security Division, the Division of the Justice Department that you and I both led at different times. It was touted as this unprecedented crack down on terrorist fundraising on social media. This is a new twist on a tried and true method of using the banking system and the illicit movement of funds to fund terrorist activity.

Ken Wainstein:             In this case, they’re using cryptocurrency and blockchain technology. I’m not even going to pretend to be an expert in blockchain technology. If I wanted to get a real good explanation of it, I’d probably get my 11-year-old to do it, since she’s much more techno expertise than I am.

But the whole idea of the blockchain is literally just a creation of the last 11 or 12 years is that there’s this digital ledger. Cryptocurrency can travel over a distributed network. It’s not like one place where all the money is kept. It is transferred among people. There’s a notion out there that it can be done anonymously, or at least with more privacy. Though, in fact, and I think this case highlights this fact, the anonymity is easily pierced.

Here we had these terrorist organizations using social media to openly solicit contributions of cryptocurrency, specifically for terrorist, violent activities. People did it, they provided a cryptocurrency, and the Justice Department and fellow intelligence law enforcement agencies were able to identify those transfers, seize them, and actually in one case, they actually operated the system that actually received those contributions.

So pretended to be the recipient and received the contributions and be received the information, but the people who were sending those contributions in specifically for terrorist activities. So really a masterful piece of investigation and prosecution.

Lisa Monaco:                Yeah, absolutely. It’s interesting this whole notion of the use of cryptocurrency, it’s got supporters and detractors unsurprisingly. The supporters of this new technology and this peer to peer way of exchanging funds say, “Look, this is great. It’s a virtual currency that allows you to exchange money with people who might not have access to the traditional banking system.” The problem of the unbanked it’s a significant issue.

It might allow for money flows into people who don’t have necessarily access already access to those systems. There’s also an argument that it is more secure. It allows for secure transactions. It can allow for more privacy and security in those transactions, precisely because as you said, the distributed nature of the blockchain technology that under pins the actual cryptocurrency of things unlike Bitcoin.

There’s also an argument that it can help law enforcement in the sense that the blockchain ledger can be a permanent artifact, if you will. The information is global. So in some sense, it might be more accessible. That is an argument that people have made.

But on the other hand, critics have argued that cryptocurrency has been pretty effectively exposed in this case that we’re talking about is a new weapon for terrorists and other bad actors, a way to fund their activities surreptitiously. But as you said, we should be clear, terror finance is nothing new. The use of illicit money flows to fund terrorism is pretty old, relatively speaking, but this is a new vector. Now the bad actors are trying to exploit.

Ken Wainstein:             Yeah. They’re both law enforcement and national security concerns with any new technology that it has its dark sides and positive sides. So one report recently that less than 1% of the transactions with cryptocurrency, or maybe it was Bitcoin specifically, or it related to illegal activity. So the vast majority is legal activity and providing the services to the unbanked around the world, which is terribly important.

Part of the rarity, I guess, or the illegality is because there actually is a way for law enforcement to identify bad actors who are using cryptocurrency technology to fund a wrongdoing. But then look, as with any new technology, the regulatory schemes are immature and are developing and I’m sure wrongdoers, both nation states and criminal types are trying to take advantage of that for money laundering and other purposes.

I read an article about how the Seychelles Islands were onboarding clients without any identifying information, which of course makes it hard then to try to identify money laundering and that thing. So I take time for the regulatory regime around the world to catch up with this technology. In the meantime, people will try to take advantage of it and we’ve seen that.

So for example, I think in the Mueller report, they talked about how some of the Russian operatives who are conducting their information warfare and their cyber attacks against the 2016 election laundered $90,000 worth of cryptocurrency in order to fund those operations. So pretty good example of a nation state engaged in blind activities using the cryptocurrency network to fund those active.

Lisa Monaco:                So I see it used in cybersecurity cases. In work that I’m doing with companies that Bitcoin is what’s demanded from bad actors who are conducting ransomware attacks. So it’s becoming something that is being used more and more in some of these schemes. So I don’t know for me, Ken, the bottom line is, it is certainly a brave new world. We’ve now got terror groups and other bad actors, as we’ve described, using these new means and adapting their terror finance activities for the digital age. There’s going to be a lot more to see in this space.

So we’ve just been talking about the double-edged sword of the technology of blockchain and the cryptocurrency that it enables, there’s lot going on in the technology space and national security space over the last week or so. We’ve got a new executive orders that the Trump administration has issued specifically going after TikTok and WeChat. Now, you may need to get your 11-year-old again, Ken, to explain to you what TikTok is?

Ken Wainstein:             Are you kidding? She spends 23 of 24 hours a day on TikTok.

Lisa Monaco:                I haven’t seen any of your TikTok. I shutter to think what a 15 second TikTok dance video from Ken Wainstein would look like.

Ken Wainstein:             Oh, it’s hot. It’s hot.

Lisa Monaco:                Thanks for that visual. So this caught a lot of headlines, one, because it involves TikTok and everybody, most people, know what that is or they’ve got kids who are constantly on it. But these are pretty important moves when you think about both the intersection of technology and the data issues around privacy and national security that people are focused on and what it says about the ratcheting tensions with China. So let’s unpack what these executive orders were.

Ken Wainstein:             So president issued executive orders as to both TikTok and WeChat. TikTok, what we all know, is that service that allows short videos to be disseminated and then WeChat is exactly that a chat service.

Lisa Monaco:                And a payment platform. It’s what everybody in China uses.

Ken Wainstein:             Starting with the TikTok order, the President declared, and this is pursuant to his authority. He declared that there is a national emergency that he’d announced in a previous executive order back in 2019 about the need to secure our country’s information and communications technology, and supply chain against foreign interference. That’s the emergency that he had already announced.

Based on that emergency, in this new executive order, he said that they needed to take action against TikTok because TikTok and its use was seen as a threat to emergency that it might add to that emergency. Specifically, the executive order said that within 45 days, the Secretary of Commerce would determine which transactions would be damned with the company that owns TikTok, which is called ByteDance, a Chinese company.

So the import of this is to band transactions with ByteDance and TikTok, which is pretty striking because TikTok is used, as you said, by every kid in this country. It has a significant presence. Offices in the, like here in the United States. It has investments in the United States. It has terms of service with all the people who use it. So taken to its fullest extent, this could ban any interaction and subject somebody to punishment for any business interaction with TikTok.

Similar executive order, basically identical executive order as it relates to WeChat. These winning days were put in place without a lot of explanation, other than a general reference to the threats that they were concerned about and that specifically that the reason for this was, as I said, to try to protect the American telecommunications and internet, and to prevent these systems from being used to collect information about US persons that maybe the Chinese could take advantage of.

Lisa Monaco:                That’s go at here what the concerns might be, that motivated some of this. On the one hand, you’ve got massive amounts of data collection going on in something like TikTok and WeChat collecting data. They’re not alone in this quite obviously, but collecting data on US users that could be used by the Chinese government for intelligence purposes and other reasons. So that is one set of concerns animating I think, potentially these actions.

Then you’ve got the broader concerns that China is going to use the data that it collects through these services and others coupled with it’s significant control that it exerts over Chinese companies. It could use this data to inform and accelerate its own technology development efforts and win this in or advance in the innovation race that China and US have really been dueling in for the last couple of years.

This is a piece I think, with the Trump administration’s effort, to move to try and isolate more China and the purchase of Chinese technology. We see this in the efforts to get our allies not to purchase from Huawei, et cetera, and to use Huawei to build their 5G grids, et cetera. So this is all of a piece with the strategy to isolate China, to keep them from advancing in this innovation race.

Ken Wainstein:             So in terms of the rationale, the rationale is that they’ve been floated are the ones that, in terms of its specific threat that, relate to the national emergency that the president announced and the previous executive order, it’s the fact that these companies might use the information. Obviously, they collect a lot of information about the users, both WeChat users and TikTok users.

It’s secondly, that TikTok, in particular, might be censoring content that the Chinese government doesn’t approve of. Their concerns that they were censoring content about the Hong Kong protests and about how China treats Muslim minorities and that kind of thing. So that’s obviously a concern. Then also, these platforms can be used to spread this information back to what we talked about in relation to the elections.

But generally, there’ve been allegations that the Chinese government had TikTok disseminate videos that addressed conspiracy theories about how the coronavirus was spread. They have these nest of concerns that are legitimate National Security Counterintelligence concerns.

Lisa Monaco:                We should point out the Senate voted recently to prohibit federal employees from using TikTok on their government phones, the Department of Homeland Security, the Department of Defense has all tells its employees not to use TikTok. I think the government of India banned the use of TikTok and other Chinese mobile applications. So these are not farfetched concerns.

Ken Wainstein:             Not at all. The broader concern that you said, these are Chinese companies and under Chinese law. The Chinese government can prevail upon them to do things for the Chinese government’s interests. TikTok says they respond to these allegations. They deny that these are real concerns. They talk about how TikTok information about US users is stored in the US and I think there’s a backup in Singapore, but not in China. But it’s still a very real concern that the Chinese government can lean on Chinese private companies to do their bidding.

We’ve seen that over and over. You talk to US Secret Service Officers. I just remember the endless stories about going into hotels in China, private company hotels, and pulling listening devices out of the wall when I was there for the government. So that’s an example of a private company where is being used, one way or another, for the Chinese government’s intelligence purposes.

So it’s a very real concern. I don’t want to dismiss it. The question though is, does the president have that authority? I’m sure this will probably be subject to a challenge both on first amendment grounds, because this is expressive activity. Also on constitutional grounds, because TikTok is not like one of these Hong Kong officials who’s been designated in response to the new national security law in Hong Kong.

This is a company that’s invest in America, in our economy. It has all the constitutional protections of any other company here in the United States. So there are going to be significant legal challenges against it. But as you pointed out, the President under AEEPA, has the authority.

Lisa Monaco:                AEEPA, it sounds like you just had a-

Ken Wainstein:             A hiccup-

Lisa Monaco:                … yeah, a hiccup exactly. You’re referring, of course, to the international emergency economic powers act, right?

Ken Wainstein:             No, I’m referring to AEEPA.

Lisa Monaco:                Yeah, exactly. Things that are interesting about this to me is this is a expansive use of an expansive power, in this ability to sanction or restrict investment in the United States, to restrict transactions with these companies. It is another sign in what people have described as a new cold war between China and the United States.

But let’s talk about the authorities here for a second. AEEPA, what you just referenced in your hiccup that you just had, is one of these very significant authorities. It’s one of a group of authorities that the president has, the executive branch has to restrict foreign investment or other interactions with companies and under other authorities to review transactions and potentially to block them or impose conditions on them.

There’s a basket of these authorities, AEEPA authority is one of the most significant. It’s interesting this authority, the one we’ve been talking about AEEPA, grew out of the Church Committee Hearings and the reviews that were done in the ’70s of a very expansive executive power, whether it was in the form of overstepping by the CIA, the FBI, and ultimately of course, Watergate.

At the time, it’s interesting, the church committee that is, was focused on this very Orwellian sounding law called The Trading with the Enemy Act. That was used to prosecute Americans who did business with Germany in the World War I era. The view of the church committee at that time was that was a very expansive statute and they were looking for something consistent with their mandate to review expansive executive power. They wanted to have Congress have some more of a role in reviewing the use of such powers.

So this AEEPA statute has some ability for Congress to review this declaration of a national emergency at regular intervals that is, and can recertification processes. I remember when I served as Homeland Security Advisor, as I’m sure you had this role too, Ken, there would regularly have to be a recertification of certain national emergencies that the president had declared and have to report back to Congress.

So it is interesting that this very broad power has these roots in a century ago this original use to constrain trading with the enemy as it were.

Ken Wainstein:             Yeah, it’s actually just interesting to go back and look at the first use of that statute right after it was passed, you were to young to remember this, but I, of course I’m not, which is the Iran hostage crisis. When the Iranians rose up and took over our embassy and held whatever several dozen Americans hostage for 400 and some days. President Carter was in office and this statue was new in the books.

Soon after the Iranians took over the embassy, they tried to pull out $6 billion of assets that were here in the United States. Obviously, realizing that they were on a different footing vis-a-vis in the United States now. So they wanted to get their assets out. The president really agonized about what it uses this authority, because he was worried about the message it would send to the world that we would be stepping in argument, be stepping into the financial arena and seizing people’s assets. But he did, which was the right call ultimately. I think that was an important test run.

Speaker 3:                    Today Iran made the first move. Within hours, the United States responded. Now, the 11-day-old prices between the two countries has moved into a new phase. This was the sequence, Iran declares its intention to withdraw all its assets from the United States. They claim $12 billion worth. The United States says no more than six billion. President Carter, then formally declared a national emergency and blocks or freezes all property and funds of the Iranian government in this country, meaning they can’t withdraw anything and instill another counter mode.

The Secretary of State rushes to New York to try to block Iran’s demand for a meeting of the UN Security Council and action virtually unprecedented for this country to take. But then, it is also unprecedented for diplomats and embassy employees to be held hostage in and by the country that is supposed to be their host.

Ken Wainstein:             Obviously, it’s hard to think of more compelling facts for using this authority to intrude on the economy and financial transactions than trying to keep the Iranians who were holding our people hostage from getting their funds out. So that was the first of the most high profile uses of this.

Now, we see that it’s used much more regularly. In situations like this, where maybe the threat is not so immediate, not so neatly connected to blatantly criminal and release activity, but as yet an insidious national security threat as people alleged regarding TikTok and WeChat.

Lisa Monaco:                There was one other aspect to this whole TikTok story that I found fascinating over the last couple of weeks. That is this whole controversy and discussion about whether or not TikTok could be purchased and spun out to a US company and what that transaction would entail. President Trump weighed in and a really unconventional, shall we say, way when he talked about if such a transaction were to occur, it could only occur in his view if basically the US government got a cut. Got a cut of that transaction.

President Trump:          But if somebody, whether it’s Microsoft or somebody else buys it, that’ll be interesting. I did say that if you buy it, whatever the price is that goes to whoever owns it, because I guess it’s China, essentially, but more than anything else. I said a very substantial portion of that price is going to have to come into the treasury of the United States because we’re making it possible for this deal to happen.

Right now, they don’t have any rights unless we give it to them. So if we’re going to give them the rights, then it has to come into this country. It’s a little bit like the landlord tenant without a lease, the tenant has nothing.

Lisa Monaco:                What was your reaction to that?

Ken Wainstein:             Yeah, and that’s the first. Like a referral fee for the US government allowing a transaction.

Lisa Monaco:                Referral fee, protection money, extortion.

Ken Wainstein:             That’s a novel one. So I’m not really sure what to make of that. It’ll be interesting to see whether such a “cut” gets paid. I’m not sure there’s any legal prohibition to that, but yeah, it tell you that’s a first for me, I’ve never heard of anything like that.

Lisa Monaco:                I don’t think there’s any legal authority for it, right?

Ken Wainstein:             No, there’s that too, yeah.

Lisa Monaco:                Yeah.

Ken Wainstein:             So we’ll see though, that might be key.

Lisa Monaco:                Yeah, people have likened it to protection money. All kidding aside, there’s real concerns that one could use that type of mechanism, to say, “Oh, the US government’s going to get a cut.” To have the president say that, you could see it being used to be punitive against some companies and not against others to influence transactions. In effect, you’d have the President of the US government actually has an investment banker. It’s a strange concept.

Ken Wainstein:             Right, and it is troubling. My sense is it’s probably going to have come out in the wash and then maybe it was not a well-formed concept.

Lisa Monaco:                Well, the other thing we should say about this, and again, going back to our Justice Department experience this, it does smack of a pay to play scheme, which is exactly what our own law prohibits our own companies from doing in other countries. So for instance, if you’re a company seeking to have a contract in some foreign country, there’s laws on the books, quite obviously, to prohibit the US company from paying bribes to that foreign government to get those contracts.

For obviously good reason, we want to discourage corruption both in the US company. Frankly, we want to discourage corruption in those governments abroad. So there’s a real principle at play here.

Ken Wainstein:             Right. If there’s a challenge as to the legality of any action taken against WeChat or TikTok, the basis for that action and have to be laid out. So there’ll be tested in the courts, ultimately, probably. I can tell you that my 11-year-old is very concerned about this. I’m sure this is probably the only podcast that she’ll listen to of mine, because she-

Lisa Monaco:                The fate of TikTok?

Ken Wainstein:             Yeah. She lives by TikTok.

Lisa Monaco:                She clearly is not concerned about the foreign corrupt practices act, right?

Ken Wainstein:             No.

Lisa Monaco:                The US statute, right?

Ken Wainstein:             Oh yeah, or election interference or anything like that. This is all about TikTok. In fact, she was particularly concerned a few weeks ago, you might remember there was talk about the possible demise of TikTok because apparently TikTok users coordinated their actions before the President Trump’s rally out in Tulsa, Oklahoma. They coordinated their efforts to buy up a lot of the tickets to that rally and then not show up.

Lisa Monaco:                Was your daughter part of that scheme?

Ken Wainstein:             On the advice of my counsel, I will not answer that question.

Lisa Monaco:                Exactly, right.

Ken Wainstein:             No, she was not. But there was talk about how that might have angered the administration and that might be the end of TikTok. So she took notice of that part of the evening news because she was very worried about the fate of TikTok. So she will be following this story very carefully. So therefore, we’re going to have to have a TikTok segment in basically every podcast from now on.

One more thing I think we should raise before we call it a wrap. Another important, what’s going to follow on piece of breaking news from one of our earlier podcast discussions. That’s about Hong Kong and about what’s happening after the passage of the new national security act and Hong Kong and the tightening control of the Chinese central government over Hong Kong and its economy and its to-date Democratic processes.

This is worth us addressing on a regular basis because Hong Kong is a critically important part of the world economy, as you know. It was a British colony up until, whatever, like 24, 25 years ago. The British and the Chinese struck a deal where British control would be seated at the Chinese. But it was a “one country, two systems process” where Hong Kong would be part of China, but Hong Kong would have its own system for 50 years. This 50 years starting from 1997, which meant that there would be their Democratic free systems that Hong Kong has historically enjoyed up until 2047.

This new national security law was put in place at the end of June, I think the night before the 23rd anniversary of that agreement. So only 23 years into a 50-year agreement, basically reigning in those Democratic freedoms and putting Hong Kong under the same anti-Democratic constraints that the rest of China are under.

And outline a variety of things, succession, subversion, terrorism, collusion with foreign governments, all things which may be on their face sound like the things that should preferably be criminalized, even in Democratic institutions, but clearly are being interpreted much more broadly than we would, for example, just arresting people for having t-shirts that express sympathy for free Hong Kong.

It’s a real concern for any part of the world, but particular for Hong Kong, which is such an economic nerve center of the whole world. Just a few days ago, we had a high profile arrest that was of the pro-democracy media magnet, Jimmy Lai and he was arrested pursuant to this new authority.

Lisa Monaco:                So this is obviously connected to the themes we’ve been discussing throughout the episode here. This was the first time, the first sign that this national security law is being used in a way as people feared, to suppress descent. So you mentioned the arrest of Jimmy Lai, this pro-democracy media tycoon in Hong Kong, he operates a newspaper called the Apple Daily in Hong Kong.

There was a very, very public arrest and raid of him and raid of the headquarters and the offices of Apple Daily. So it’s interesting. This was done in a really public way that the raid was captured on video. One might conclude that that has intimidation effect, who knows, but that could also be a real rallying point as well for the pro-democracy movement in Hong Kong to see the way this is being used.

Before this arrest of Jimmy Lai occurred, just a few days, I think before the Trump administration had imposed sanctions on Hong Kong, Chief Executive, or the leader of Hong Kong, Carrie Lam, and some other officials in response to the passage of this national security law. This was done before Lai’s arrest.

Interestingly, I took note, Ken, and I don’t know if you saw this. In response to Lai’s arrest, President Trump was asked about his reaction to this use of this draconian law against this pro-democracy actress. He inexplicably spoke about the economic advantage to the United States from cracking down on Hong Kong as a result of this national security law being imposed.

In other words, because the U S is now going to cut off some economic ties with Hong Kong as a result of this national security law being imposed, that would read down to the economic advantage of the United States.

Speaker 5:                    I’d love to ask opinion about what recently happened in Hong Kong, recent attack on press freedom in Hong Kong and Jimmy Lai was arrested, his newsroom was raided. How will the US respond to this?

President Trump:          Well, I think it’s a terrible thing. But one thing that we have done, we gave tremendous incentives to Hong Kong because of freedom. We want freedom. We were giving tremendous economic incentives to Hong Kong. We have now withdrawn all of those incentives and it will be impossible for Hong Kong to compete with the United States with respect to that, it just won’t be because we’ve taken all of the incentives away.

If you look at China with the World Trade Organization, as an example, they’re getting tremendous because they’re considered a developing nation, which is ridiculous. Why should they be a developing nation, but we’re not. They get tremendous incentives. We have, by the way, told them it’s unacceptable. And we’ve been doing that for a long time. They understand exactly how we feel.

Lisa Monaco:                That was the response to the use of this national security law against a pro-democracy advocates.

Ken Wainstein:             The way that the Chinese government handled this is straight out of the repression handbook because they go into a media company and arrest this guy and his brothers in front of everybody. He doesn’t get sent back to mainland China, thankfully. He’s released on bail. I think a pretty substantial bail was released on bail. Now he returns as a hero and and he’s not backing down.

So interesting to see how they respond to that. Whether they doubled down on the repression or if they may step back. But he’s in serious jeopardy and they don’t mess around. I think you can look at as an example. Jimmy Lai himself, just last in June, I think, in one of his tweets invoked another journalist from China, who was arrested back in 2005 named Shi Tao.

He was arrested in 2005 because he had sent a memo out to a newspaper in New York City. This is an official memo that prohibited journalists from writing about at that point, upcoming anniversary and the tenement square protests. He sent that out and that of course is contrary to the Chinese government’s interests.

They, as I recall, the government sort cooperation from Yahoo and I guess had been the mechanism by which that memo had gone out. It was quite controversial about whether Yahoo cooperated with the Chinese government, but ultimately the Chinese government got the information they needed to connect the sending of that memo to Shi Tao. Then Shi Tao was arrested and I think he got 10 years in prison.

It was quite controversial over here because, whether there was coordination or cooperation between Yahoo and the Chinese government. But I think it’s the thing that has been going on a long time Chinese mainland and the concern is that it’s not going to start happening in Hong Kong.

Lisa Monaco:                I would just say it there was high profile hearings and in a very powerful statement by then Congressman Tom Lantos, a Holocaust survivor.

Ken Wainstein:             Aside from the tragedy of what happened to the Chinese journalist, this was very controversial back here in the United States because Yahoo was roundly criticized for having literally cooperated with the Chinese government in unmasking, who it is, who sent that memo over to the United States and thereby leading to the arrest of Shi Tao.

That then triggered and actually some hearings up on Capitol Hill in which the Yahoo’s role in that incident was explored. There were some very powerful back and forth between then, Congressman Tom Lantos and officials from Yahoo about the appropriateness of their interaction with the Chinese government.

Tom Lantos:                  Much of this testimony reveals that while technologically and financially you are giants, morally you are Pygmies. This testimony, this whole morning has been an appallingly disappointing performance. I simply cannot begin to tell you how disappointing Mr. Yang’s and your testimony was the attempt to obfuscate to divert, to describe this as a dialogue. This is a congressional testimony under oath precipitated by the outrageous behavior of the company. Apparently not much has been learned in the process.

Lisa Monaco:                So Ken, before we wrap, I want to nominate our unsung hero or heroes for the week. What do you think?

Ken Wainstein:             Absolutely, go for it.

Lisa Monaco:                So I’m going to nominate, in honor of the 100th anniversary of women’s suffrage, which of course we acknowledge and commemorate this week. I’m going to nominate all those folks who are helping to get people registered to vote, regardless of where you stand on the political spectrum and being able to exercise your right to vote. Obviously, one of the most precious rights that we hold.

So folks who are registering people to vote, protecting the polls, protecting the election security infrastructure, which we’ll have more to talk about, I’m sure, in upcoming episodes but that would be my nomination for unsung heroes for this week.

Ken Wainstein:             Absolutely. I completely second that, and I think it’s appropriate for us to be setting those people. This being a national security broadcast. I think in the past I had taken for granted. These are lovely people who are there helping their neighbors vote, but now we see that the vote, the election is a battleground. It’s a national security battleground where we have adversaries trying to disrupt the most fundamental activity in American democracy.

The people who are helping to keep it all operate smoothly, are all a part of resisting that effort and making sure that every vote counts and then we have the opportunity to select our leaders and dictate our future. So hats off to them and they are our unsung heroes from this week.

Lisa Monaco:                So that’s all the time we have for today. We’ll be back in two weeks.

Ken Wainstein:             In the meantime, send us any questions you might have at [email protected] and we’ll do our best to answer those questions around next podcast.

Lisa Monaco:                Till next time.

Ken Wainstein:             That’s it for this week’s episode of the United Security Podcast. Your hosts are Lisa Monaco and Ken Wainstein. The Executive Producer is Tamara Sepper. Senior Producer is Adam Waller. The Senior audio producer is David Tatasciore. The editorial producer is Jennifer Indig and the CAFE team is David Kurlander, Nat Wiener, Matthew Billy, Sam Ozer-Staton, Noa Azuai, Jake Kaplan, Calvin Lord, Geoff Eiseman, Chris Boylan, Sean Walsh, and Margot Marley. Our music is by Allison Leyton Brown. Thank you for being part of the CAFE insider community.