Modern Day Siege: Sanctions and Alternative Payment Systems LSE - - PowerPoint PPT Presentation

▶
modern day siege sanctions and alternative payment systems
SMART_READER_LITE
LIVE PREVIEW

Modern Day Siege: Sanctions and Alternative Payment Systems LSE - - PowerPoint PPT Presentation

Nov 09, 2022 45 likes •1.33k views

Modern Day Siege: Sanctions and Alternative Payment Systems LSE SRC, DSTL London 2 December 2019 Serial blockchain entrepreneur focused on connecting blockchains & regulated finance Contributor to the Bank of Englands RTGS renewal

slide-1
SLIDE 1

Modern Day Siege: Sanctions and Alternative Payment Systems

LSE SRC, DSTL London 2 December 2019

slide-2
SLIDE 2

Nikola Tchouparov Co‐founder & CEO at nikola@moneyfold.co.uk @nik_tchouparov Based in London, UK Serial blockchain entrepreneur focused on connecting blockchains & regulated finance Contributor to the Bank of England’s RTGS renewal programme Contributor to EBA policy on innovation and regulatory sandboxes In previous career implemented trading & risk management platforms at banks around the world

slide-3
SLIDE 3

What is a Siege?

Google: “a military operation in which enemy forces surround a town or building, cutting off essential supplies, with the aim of compelling those inside to surrender.”

slide-4
SLIDE 4

Famous Ancient Sieges

Example Sieges: Troy (c. 1200 BC), Samaria (9th century BC, referenced in the Bible), Babylon (689 BC), Carthage (149‐146 BC), Jerusalem (several times), Rome (several times), Constantinople (several times), Fifth Siege of Gibraltar (1449–1450), Tenochtitlán (1521), Ishiyama Honganji (1570 – 1580), Rancagua (1814), The Alamo (1836), Vicksburg (1863)

slide-5
SLIDE 5
slide-6
SLIDE 6
slide-7
SLIDE 7
slide-8
SLIDE 8
slide-9
SLIDE 9
slide-10
SLIDE 10
slide-11
SLIDE 11
slide-12
SLIDE 12
slide-13
SLIDE 13

More Recent History

Example Sieges: Leningrad (1941‐1944), Berlin Blockade (1948‐1949), Cuba (1962), Sarajevo (1992‐1996), Homs, Kobani, Marawi (2017)

slide-14
SLIDE 14

Different Outcomes Possible

  • Besieged surrender without a fight
  • Besieged put up a fight and lose
  • Besieger lose fight
  • Besieger lift siege
slide-15
SLIDE 15

Have Things Changed?

slide-16
SLIDE 16

What is a Siege?

Google: “a military operation in which enemy forces surround a town or building, cutting off essential supplies, with the aim of compelling those inside to surrender.”

slide-17
SLIDE 17

What is a Siege?

Google: “a military operation in which enemy forces surround a town or building, cutting off essential supplies, with the aim of compelling those inside to surrender.”

slide-18
SLIDE 18

Modern Day Siege: Imposed on Nation‐States Rather Than Cities

slide-19
SLIDE 19

Modern Day Siege: Economic Sanctions & Embargoes

slide-20
SLIDE 20

Commercial and financial penalties applied by one or more countries against a target state, group, or individual

slide-21
SLIDE 21

Trade Barriers, Tariffs, Restrictions on Financial Transactions

slide-22
SLIDE 22

Examples of Western Sanctions Directed at Others

  • The Cold War
  • Yugoslavia break‐up
  • Myanmar/Burma
  • Iranian Revolutionary Guard
  • Cuba
  • DPRK (North Korea)
  • Post‐Crimea Russian entities
  • Syria
slide-23
SLIDE 23

Less Obvious Examples The Case of Japan and South Korea

slide-24
SLIDE 24

“Japan announced on July 1 [2019] it would restrict exports of three chemicals to South Korea: fluorinated polyimide, resist and hydrogen fluoride.”

slide-25
SLIDE 25
slide-26
SLIDE 26
slide-27
SLIDE 27

Restrictions on Financial Transactions

slide-28
SLIDE 28

Makes It Illegal to Send & Receive Money

slide-29
SLIDE 29

Results in Financial Exclusion of the Sanctioned

slide-30
SLIDE 30

How Do You Pay for Stuff?

slide-31
SLIDE 31

Do You Surrender?

slide-32
SLIDE 32

Alternative Payment Systems (APS) to the Rescue

slide-33
SLIDE 33

The Oldest APS: Gold

slide-34
SLIDE 34

Some Countries Allegedly Settle Trade in Gold

Thank you friend That is for last month’s oil delivery

slide-35
SLIDE 35

The Kilobar = 1 kg of Gold

slide-36
SLIDE 36
slide-37
SLIDE 37

In 3 years fake “bars worth at least $50 million stamped with Swiss refinery logos”… found in the vaults of JPMorgan Chase ”

slide-38
SLIDE 38

Then There is Good Old Cash

slide-39
SLIDE 39

£1.2 million

slide-40
SLIDE 40

Somali Shilling: Value Through Scarcity

slide-41
SLIDE 41
slide-42
SLIDE 42

Hawala

slide-43
SLIDE 43
slide-44
SLIDE 44

Art: A Cold War Strategy

slide-45
SLIDE 45

Creative Types are Often Non‐Conformist Don’t Hold Steady Jobs

slide-46
SLIDE 46

Foreign Embassy Buys Painting or Sculpture for Silly Amount of Hard Currency (USD)

slide-47
SLIDE 47

Artist is Rich & Happy Looses Creative Muse

slide-48
SLIDE 48

Artist Spends USD on Non‐Productive Stuff Recovers Mojo

slide-49
SLIDE 49

USD Trickles Down Through Society Sows Seeds of Discontent for the Current Regime

slide-50
SLIDE 50

Antiques

slide-51
SLIDE 51

The Spy Gone North

slide-52
SLIDE 52

Antiques Smuggled from DPRK Sold to International Conglomerates for $1 Billion

slide-53
SLIDE 53

A $1 Billion Slush Fund for DPRK

slide-54
SLIDE 54

Now Lets Go High Tech

slide-55
SLIDE 55

Alexa & Lasers

slide-56
SLIDE 56
slide-57
SLIDE 57

CryptoCurrency

slide-58
SLIDE 58
slide-59
SLIDE 59

SIM Swapping

slide-60
SLIDE 60
slide-61
SLIDE 61

Are You Using SMS for 2FA?

slide-62
SLIDE 62

Smurfing Over LinkedIn

slide-63
SLIDE 63

What is Smurfing?

slide-64
SLIDE 64

Use multiple individuals and/or transactions to make cash deposits, to buy monetary instruments

  • r bank drafts.
slide-65
SLIDE 65

Amounts under the reporting threshold

slide-66
SLIDE 66

The individuals hired to conduct the transactions are referred to as “smurfs”

slide-67
SLIDE 67

Example: Drug dealer in Shoreditch was depositing Pounds into a bitcoin cash machine every day

slide-68
SLIDE 68

The drug dealer got noticed. Stopped depositing.

slide-69
SLIDE 69

Turned his clients into smurfs. Clients deposit cash and give bitcoin to the dealer.

slide-70
SLIDE 70

Back to Smurfing Over LinkedIn

slide-71
SLIDE 71
slide-72
SLIDE 72

Intro

slide-73
SLIDE 73

“I’m a freelancer from China… I’d like to buy or borrow some US or European upwork accounts.”

slide-74
SLIDE 74

Emotional Appeal to Solidarity/Humanity

slide-75
SLIDE 75

“the rate of Chinese account is lower than European or USA account.”

slide-76
SLIDE 76

“it is very difficult for me to earn more money using Chinese account.”

slide-77
SLIDE 77

“if I get the US or European account I could be hired easily with high rate”

slide-78
SLIDE 78

Identity Lending

slide-79
SLIDE 79

“I need to work on your local via TeamViewer.”

slide-80
SLIDE 80

“In order to successfully withdraw money from UpWork out of danger, we have to link your paypal or payoneer account to UpWork.”

slide-81
SLIDE 81

“So every time I withdraw money from UpWork, you should transfer the money from your account to my account again.”

slide-82
SLIDE 82

“you don’t mind sharing Paypal or payoneer account login… better to share the credentials with me so that I can do the transfer myself.”

slide-83
SLIDE 83

Offers Decent Financial Compensation “Profit Share”

slide-84
SLIDE 84

“I will pay $200 for European monthly for years. So you can earn $2400 per year without work.”

slide-85
SLIDE 85

Adds a Sense of Urgency

slide-86
SLIDE 86

“The first month’s payment will be made immediately when the account pass the video verification.”

slide-87
SLIDE 87

Many People Fall for the Promise of Free Money

slide-88
SLIDE 88

Recruit 10,000 people (0.002% of EU population). Move $600M annualy without being noticed.

slide-89
SLIDE 89

Cost of Operation ~3% Similar to Using Traditional Above‐Board Transfers

slide-90
SLIDE 90

Barter & Trade Offsets

slide-91
SLIDE 91

Oil Potatoes

slide-92
SLIDE 92

Doctors & Nurses Processed Sugar

slide-93
SLIDE 93

North Summer Potatoes South Winter Potatoes

slide-94
SLIDE 94

Blackmail or Hunger Strike

slide-95
SLIDE 95

Food & Oil Non‐Proliferation

slide-96
SLIDE 96

Multi‐Lateral Trade

slide-97
SLIDE 97

Deliver Rockets to Friend A Deliver Oil to Friend B

slide-98
SLIDE 98

Friend A uses rockets to cut 5.7 million barrels

  • f oil a day or about 5% of global production
slide-99
SLIDE 99

Oil Prices surge 20%: Biggest move on record since 1980’s

slide-100
SLIDE 100

Friend B can re‐sell oil for 20% higher prices and split the profit

slide-101
SLIDE 101

Several Political Goals Achieved Siege Continues

slide-102
SLIDE 102

Plus Get a Bonus

slide-103
SLIDE 103
slide-104
SLIDE 104

How to Hack a Central Bank?

slide-105
SLIDE 105
slide-106
SLIDE 106

2016 Bangladesh Central Bank Cyber Heist

Wikipedia: 35 fraudulent instructions issued by hackers via SWIFT to illegally transfer close to US $1 billion from the Federal Reserve Bank of New York account belonging to the central bank

  • f Bangladesh
slide-107
SLIDE 107

5 of 35 Transactions Successful

Wikipedia: The Federal Reserve Bank of New York blocked the remaining thirty transactions, amounting to $850 million, due to suspicions raised by a misspelled instruction

slide-108
SLIDE 108

Bank of England

slide-109
SLIDE 109
slide-110
SLIDE 110

“The decision comes despite evidence that implicates the Bank of England.” “It means no one will now be prosecuted in the UK for so‐called "low‐balling", where banks understate interest rates they pay to borrow cash.”

slide-111
SLIDE 111

Why is This Interesting?

slide-112
SLIDE 112

Lower LIBOR Means Inflated MTM, Lower Payments, Inefficient Markets, Asset Bubbles

“An estimated $200 trillion in notional transactions reference USD LIBOR in the cash and derivatives markets with more than $35 trillion extending past 2021” ‐NY Fed

slide-113
SLIDE 113

Are Prices Arbitrary? What is the Real Value of Debt & Derivatives?

slide-114
SLIDE 114

Are We Under Siege? From Whom? A Case of Obsolescence?

slide-115
SLIDE 115

A Digital Currency Backed by the Mineral Wealth of a Nation

For example: The Petro – Asset‐backed stablecoin backed by Venezuela’s Unextracted Oil Reserves Initially launched on the NEM blockchain

slide-116
SLIDE 116
slide-117
SLIDE 117

People’s Bank of China

CBDC  Central Bank Digital Currency Not crypto. Not blockchain.

slide-118
SLIDE 118

Shanghai Securities News: Changchun Mu, Head of the Digital Currency Research Institute

Functional attributes the same as paper money, but it is just a digital form. Free from the control of the traditional bank account system.

slide-119
SLIDE 119

Shanghai Securities News: Changchun Mu, Head of the Digital Currency Research Institute

Main reason for developing the digital currency is “planning ahead” to protect monetary sovereignty and China’s legal currency.

slide-120
SLIDE 120
slide-121
SLIDE 121
slide-122
SLIDE 122

Non‐Alternatives: Money Laundering

slide-123
SLIDE 123
slide-124
SLIDE 124
  • Allegations of

laundering $250 billions

  • Investigation ongoing

since 2004

slide-125
SLIDE 125

Annual Money Laundering 2‐5% of Global GDP

slide-126
SLIDE 126

Thoughts on the Future

slide-127
SLIDE 127

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn” ‐Alvin Toffler

slide-128
SLIDE 128

Thank you for your attention!