Economic Warfare

Our Mission (2012)

The American Center for Democracy (ACD) and its Economic Warfare Institute (EWI) are dedicated to exposing and monitoring threats to the national security of the United States and other Western democracies. Applying the political, counter-terror, law enforcement, and technological capabilities of its principals, ACD focuses on uncovering economic warfare and finance threats: terror financing, political corruption, narco-terrorism (i.e. the fusion of the drug trade with terrorism), international terrorist organizations and sponsoring states, financing cultural warfare, lawfare, intimidation of the free press, political corruption and the sponsoring of radical anti-Western democracy movements.

In addition to tracking and analyzing financial and economic threats, ACD/EWI develops methods to assist with early identification of emerging threats, including decision aids such as war-games, software, videos, briefings, and feature films.  These would help identify, alert and facilitate timely protective and preemptive measures to thwart attacks on critical elements of the American economy.


Historically, government economic risk assessment is largely limited to potential threats to individual parts of the country’s infrastructure. The private sector, for its part, has concentrated on Internet security and commercial espionage.  But there is no holistic, shared and coordinated public/private front to preempt and mitigate threats to the U.S. economy.

ACD/EWI experts have developed a synergistic approach to inform both the public and private sectors on emerging threats. The organization also offers programs to help facilitate government, public and private sectors’ cooperation with one another to minimize the risks to our national security. 

No other organization today has the aptitude or will to do this.

Current Activities

* Financial Risk Analysis Software Development: ACD/EWI is consulting with BBN Technologies on the development of new software that will aid financial analyses. Commissioned by The Intelligence Advanced Research Projects Activity (IARPA)

* Table Top Exercises: ACD/EWI has developed innovative Table Top Exercises (TTX) for top decision-makers in government and the private sector to help identify emerging and future threats. The outcomes of these exercises will be more than instructive to the participants; they will facilitate the development of new decision aids for government and private-sector analysts and decision-makers. IARPA is currently reviewing the proposal for this project.

* Public and Private Briefings: ACD/EWI has held many public briefings on terrorist financing and economic warfare. A Capitol Hill briefing, “Economic Warfare Subversions: Anticipating the Threats,” was hosted by Senator Jon Kyl in July 2012. This was the first of a series of briefings planned for government, public and the private sector. Videos of the briefing were posted on YouTube and viewed close to140,000 times in just three months.

* ACD/EWI has developed a unique anthology of the Middle East and Islamic banking institutions that are predisposed to terrorist financing and other possible venues of economic warfare.

* Blog and Digest:  The organization maintains the ACD/EWI Blog and Digest, providing a centralized, comprehensive resource that connects the dots on indicators of possible and actual finance/cyber/space and more-conventional threats to the U.S. economy.  It reaches more than 10,000 subscribers who include senior government and private sector decision-makers, as well as academic and media personalities.  The ACD/EWI website has gathered more than 7,000 articles to date and organized them into a searchable database.

* Subject Matter Consultations with Government:  The U.S. Defense Department has invited ACD/EWI to consult for war games on economic warfare, terrorist financing, and “how terrorists think” activities. ACD/EWI has also provided briefings aimed to assist the awareness of the Department of Homeland Security, the Federal Bureau of Investigations, branches of the U.S. military, Department of Treasury, and Central Intelligence Agency, investigators. Topics included potential threats posed by a variety of sources, such as conventional and unconventional Weapons of Mass Effect (WME), cyber attacks, manipulations of financial markets; urban and forest arson, terrorist financing, etc., and their consequences—as well as potential preventive measures and alternate solutions.

Vision Statement

The principals involved with ACD/EWI have specialized for many years on

a wide range of financial and economic threats to the national security of the U.S. We aim to focus on developing a variety of training programs to raise the awareness and preparedness of decision-makers in government, public and the private sector to emerging threats.

As ACD/EWI coalesces, the matters below will become ongoing programs, each under the direction of its own principal researcher and his or her team.

Publications, briefings, and other appropriate products will be produced on

a regular basis. Our programs will include:

* Creation of a “docu-drama” (DVD-based) on a realistic and deliberate attack on some aspect of the financial industry and critical infrastructure where the purpose is to cripple the economy for a sustained period of time.  The product will be used as a training and awareness vehicle for a wide range of government and public officials at various levels of jurisdiction, emergency personnel, analysts, etc., as well as decision-makers in the private sector.

We will also provide briefings and training on issues such as:

  • The vulnerability of the financial industry and other public infrastructure
  • The evolution of terrorist groups and activities and the changing landscape of terrorist funding
  • Corruption, money-laundering, and malign strategic investment
  • Economic activity as an international political tool
  • The interrelations of transnational organized crime and state and non-state terrorist actors

Additional activities ACD plans to pursue include:

  • Mapping the new actors in the Middle East and their links in the U.S. and the West
  • Document and analyze the financial resources of the global Muslim Brotherhood organization in a book: The Muslim Brotherhood Inc.

While pursuing the above, ACD/EWI will maintain the flexibility to deal with new threats and concerns as they appear, launching new short-,

intermediate and long-term projects.

As the organization matures, we envision it as a national nonprofit

information resource and facilitator of action to mitigate emerging threats to the U.S. economy and national security.

Anticipating the Threats
A Capitol Hill Briefing, July 9, 2012

Economic Warfare Subversions: Anticipating the Threats

Click here for the event report

Videos from the Event

Dr. Rachel Ehrenfeld, Director ACD/EWI

Dr. Rachel Ehrenfeld, Director of ACD/EWI

Rachel Ehrenfeld, Ph.D., Director of the American Center for Democracy and the Institute of Economic Warfare.


Following the trail of money that fuels terrorism and pays for the corruption of government officials over the past two decades was useful to better understand the assorted threats of economic warfare. My book Funding Evil – How Terrorism is Financed and How to Stop It, caused me to look closer into one form of economic warfare that also assaulted Americans’ First Amendment rights. This led me to initiate a new law, which was unanimously passed by Congress in 2010.  As a result, American journalists, authors, and publisher are protected by the SPEECH Act from the enforcement of foreign libel judgment in the US.

This briefing is the first in, we hope, many briefings on the different aspects of economic warfare and their interaction. It is fitting that this briefing provides an initial overview of conceivable economic warfare attacks and their potential impacts on key elements of the American economy.

EWI is of the strong opinion that threats to the U.S. economy are the next great field of battle. Indeed, we are already at economic war with such state actors as China and Iran and such non-state actors as al-Qaeda and its affiliates.  The future battlefield is vast: it not only includes the realms of cyber and space but also of banking and finance, market and currency manipulation, energy, and drug trafficking. The list could go on and on.

EWI believes that this vast potential field of battle, while widely worried and written about, has not been understood as a whole. And we are concerned that, if we continue as we have been, we will not be able to recognize the interrelations between its many parts. Moreover, although we are not privy to what the government does, we feel that insufficient attention has been paid to anticipating potential vulnerabilities and taking preventative action.

Our purpose today is to go out to the cutting edge of the threats we face and to begin a dialogue on how to address them in a sophisticated and methodical fashion.

Cutting-Edge Threats

Opacity and greed combine to threaten the security of the US financial markets, compromising the stability of its economy and national security.

Take the May 6th, 2010 the U.S. stock market plunged about 1000 points (9 percent), recovering most of those losses in minutes. Still, two years later, the joint report by the SEC and the Commodity Future Trading Committee (CFTC) did not rule out “terrorism” as a possible cause for the May 2010 flash crash, and the entire financial industry still has no uniform explanation of why or how this event occurred. Though there is a general agreement that the current market structure based on high-speed trading, dark pools and fragmentation of exchanges – some 13 stock exchanges and 50 “dark pools”  –  has been the enabler.

The new market system is highly electronic, facilitating ultra-high-frequency trading is opaque and the security protocol is deficient – it does not register the origin, only the final destination – unregulated and misunderstood. This makes the current market structure vulnerable to attacks. The “flash crash” of 2010 is evidence of this vulnerability. Although the industry does not want another “flash crash,” it still has not provided a conclusive answer of how it happened.

Direct Market Access (DMA)—a term used to describe electronic trading facilities that give investors wishing to trade in financial instruments a way to interact with the order book of an exchange—plays a key role in accessing market threats. Today, DMA is often combined with proprietary algorithmic trading strategies. While the Securities and Exchange Commission (SEC) finally ruled to create an audit system (CAT), it will cover only the smallest market—equities—a day after trading took place. This decision was made apparently because the cost of auditing the whole market, more than $4 billion, is considered too high. While this is a positive beginning, it’s too limited, too little and too late.

The information age and advances in computer technology have ushered in a new market structure and its backbone is its infrastructure — new “trading superhighway”.  On this superhighway, there are no speed limits beyond the limits of science and technology at a given time. This infrastructure serves a select few, “the High-Frequency Trading (HFT) crowd.”

Aggravating the situation is the Retail Liquidity Program (RLP), a new order type. Approved by the SEC in July, the RLP is also the NYSE’s new dark pool order system.  Knight Capital, one of the biggest dark operators was quick to get on board and into trouble using the new dark route. The computer “glitch” at Knight— ostensibly caused by an old algorithm mistakenly used in a new program—costing more than $400 million to the company before the trading was halted, demonstrating the danger of moving to HFT.

Adding to the market vulnerability are the large number of the leading high-frequency programmers who reside in countries such as Ukraine, Romania, India, and the Philippines, and are not scrutinized by proper background checks.  This opens the door for cyber threats from DMA clients and even by possible “sleepers” residing at member or brokerage firms.

A new rule impacting one aspect of dark pools, the “trade at rule,” has been kicked around for the last two years. It would require dark pool participants to place real orders into the pool before they trade, providing more transparency to the market.  But this attempt to prevent dark pool operators to pick their prey– like a sniper – milliseconds before the trading closes – faces the objection of the HFT crowd.

These and other vulnerabilities of our financial markets are known to those aiming to destabilize them, offering a speedy way to corrode the confidence in the stability of the US economy.

Accordingly, early identification of financial threats is the focus of the EWI work for various customers, including both Table Top Exercises and the development of decision aids.

David Hamon

David Hamon, Distinguished Analyst, Analytic Services (ANSER),
former Director for Strategic Research and Dialogues, Defense Threat Reduction Agency (DTRA)

 General Michael Hayden

 General Michael Hayden, principal, Chertoff Group, and former director, CIA and NSA

R. James Woolsey

R. James Woolsey, Chairman, Foundation for the Defense of Democracies, former
director, CIA, and member, ACD/EWI Board of Directors.

Daniel Heath

Daniel Heath, Managing Director for North America, Maxwell
Stamp PLC, and former U.S. Executive Director Alternate, IMF

Stewart Baker

Stewart Baker, partner, Steptoe & Johnson LLP, former assistant secretary
for policy, Department of Homeland Security, and author of Skating
on Stilts: Why Aren’t We Stopping Tomorrow’s Terrorism

William B. Scott

William B. Scott, former editor, Aviation Week,
former official, National Security Agency, and author of Space Wars

David Aufhauser

David Aufhauser, partner, Williams & Connolly LLP, and former
general counsel and chief legal officer, U.S. Department of the Treasury

Michael Mukasey

Michael Mukasey, partner, Debevoise & Plimpton,
ACD/EWI board member, the former attorney general of the United States