A new type of warfare is upon us. In this new mode of war, finance is the most powerful weapon, bullets are not fired, financial institutions are the targets, and almost everyone is at risk. Instead of smart bombs, improvised explosives, and unmanned drones––economic sanctions, financial restrictions, and cyber programs are the weapons of choice. This is the new reality of modern financial warfare.
In a new article, Financial Weapons of War, published in the Minnesota Law Review, I offer an early, broad examination of the emerging realities of modern financial warfare. The Article has two chief objectives. First, it strives to offer an original preliminary understanding of the expansive effects of financial weapons of war and modern financial warfare. Second, building on that new working understanding, the Article aims to identify and address larger, emerging normative consequences for law, finance, and society given contemporary realities relating to financial warfare.
This examination of the financial weapons of war, their growing importance in national affairs, and their wide-ranging effects on law, finance, and society is divided into four primary parts. Part I provides a general layout of the modern financial theater of war. It describes the modern financial infrastructure as a globalized, high-tech, American-centric system. It then identifies systemic risks, discrete vulnerabilities, and a lineup of potential adversaries in this financial theater of war. Part I provides a sweeping survey of the emerging financial battlefield.
Part II highlights particular armaments of financial warfare. Rather than provide an exhaustive catalog of financial weapons, it offers a broad inventory of the financial weapons of war. It classifies the financial weapons of war as analog weapons and cyber weapons. It accounts for traditional weapons like economic sanctions, anti-money laundering regulations, and banking restrictions, as well as digital weapons like distributed denial-of-service attacks, data manipulation hacks, and destructive intrusions. It explains how these analog and cyber weapons are used in current conflicts with al Qaeda, Iran, ISIS, North Korea, Russia, and Syria. Part II examines and explains the utility and evolution of these weapons in modern financial warfare.
Part III contends with new concerns. It asserts that the financial weapons of war present critical challenges for traditional laws and norms relating to financial hostilities, cyberattacks, and non-state actors. It argues that certain traditional rules that governed finance and war in the past are ill-suited for a fundamentally different present, and a dramatically distinct future. It does so respectful of conventional norms and laws governing wars and armed conflicts, but mindful of the need to adapt to new realities. Part III grapples with core concerns posed by the financial weapons of war to certain fundamental principles governing war and finance.
Part IV offers new pathways. It proposes three pragmatic policy recommendations that should be undertaken in the near term response to modern financial warfare while larger issues remain unresolved by global policymakers. It advocates for innovative cybersecurity incentives, advanced technological stress tests, and comprehensive financial war games to better prepare for threats in the financial theater of war. Part IV suggests immediate forward steps to be seriously considered while larger policy and legal disagreements are being deliberated and debated by global policymakers.
The Article ends with a brief conclusion. It reminds of the growing and emerging dangers of the financial weapons of war. And it signals, with hope and optimism, the possibility of taming the savageness of financial weapons, safeguarding the economy of the homeland, and promoting the integrity of the global financial system.
The full paper is available for download here.