Spotlight On The International Emergency Economic Powers Act

On Wednesday, Federal prosecutors charged the founders of a crypto-mixing service called Samourai Wallet with conspiracy to commit money laundering and operating an unlicensed money transmitter business. In contrast, earlier this year, operators of a similar service, Tornado Cash, were charged with conspiracy to violate the International Economic Emergency Powers Act.

Inputs that matter: The International Emergency Economic Powers Act (IEEPA) provides the U.S. President broad authority to regulate a variety of economic transactions following a declaration of national emergency.

• Following committee investigations that discovered that the United States had been in a state of emergency for more than 40 years, Congress passed the National Emergencies Act (NEA) in 1976 and IEEPA in 1977.

• As of January 15, 2024, U.S. Presidents had declared 69 national emergencies invoking IEEPA, 39 of which are ongoing.

• History shows that national emergencies invoking IEEPA can last over a decade.

The opportunity: Another type of financial service designed to hide identities is the dark pool.

• Dark pools are private exchanges for trading securities that are not accessible to the investing public and have no transparency.

• Dark pools primarily facilitated block trading by institutional investors who did not wish to impact the markets with their large orders and obtain adverse prices for their trades.

• Critics argue that such facilities are vulnerable to potential conflicts of interest by their owners and predatory trading practices by some high-frequency traders.

• However, the market impact from large trades is significantly reduced using a dark pool.

• Examples of dark pools include those from Credit Suisse, Goldman Sachs, Citibank, and Morgan Stanley.

Zoom in: Conspiracy to operate an unlicensed money-transmitting business carries a maximum sentence of five years in prison.

• However, the U.S. Department of Justice states that conspiracy to violate the International Economic Emergency Powers Act (IEEPA) carries a maximum sentence of 20 years in prison.

Between the lines: According to the U.S. Attorney's Office of The Southern District of New York, Samourai has at least two features intended to assist individuals engaged in criminal conduct in concealing the source of their criminal activities' proceeds.

• First, Samourai offers a cryptocurrency mixing service known as "Whirlpool," which coordinates batches of cryptocurrency exchanges between groups of Samourai users to prevent the tracing of criminal proceeds by law enforcement on the Blockchain.

• Second, Samourai offers a service called "Ricochet," which allows a Samourai user to build in additional intermediate transactions (known as "hops") when sending cryptocurrency from one address to another.

Follow the money: The U.S. Attorney's Office claims that the two Samourai features may prevent law enforcement and cryptocurrency exchanges from recognizing that a particular batch of cryptocurrency originates from criminal activity.

• Such mixing services also provide capabilities similar to dark pools, where blocks of cryptocurrency can be traded with minimal effect on the market price.

• According to NASDAQ, dark pools capture over 40% of the average daily market share and reach as high as 50% on some days in the U.S., while in countries like Canada, they amount to only 7%, largely due to more stringent regulation.

Established just after World War II, the Universal Declaration of Human Rights of December 1948 risks collapse due to artificial intelligence (AI).

Inputs that matter: Between now and 2030, the AI market is expected to grow five-fold, from $250B annually to $1.8T by 2030.

• According to a study conducted at Carnegie Mellon, the power required to generate just 9 AI images is enough to charge a smartphone completely.

• ChatGPT alone uses half a million kilowatt-hours per day.

• "I think we still don't appreciate the energy needs of this technology," Sam Altman, CEO of OpenAI, said at a public appearance in Davos.

The opportunity: In the U.S., the line between tech companies and defense contractors is increasingly blurred.

• Google and Amazon have partnered with the Israeli military to provide AI services.

• U.S. venture capital investment in defense start-ups has doubled in four years.

• Reuters reports that a U.S. intelligence agency has contracted Musk's SpaceX to develop a network of spy satellites in a deal worth $1.8 billion.

• AI is already detecting human targets for elimination on the battlefield, thanks to a joint project between Google, Amazon, and the Israeli Defense Force.

• Ukrainian military leaders can track Russian soldier movements using Google technology.

Zoom in: A study recently published in the peer-reviewed American Psychologist journal claims that a combination of facial recognition and artificial intelligence technology can accurately assess a person's political orientation by looking at their blank, expressionless faces.

• Researchers write that the algorithm can accurately determine a person's political orientation, even when that person's identity is "decorrelated with age, gender, and ethnicity."

• The "algorithm's predictive accuracy was even higher" when it had access to "participants' age, gender, and ethnicity," describes the study.

Between the lines: Amnesty International said Wednesday that the order was on the "brink of collapse," threatened by bitter conflict on multiple fronts to the rapid and unregulated rise of artificial intelligence.

• "In an increasingly precarious world, unregulated proliferation and deployment of technologies such as generative AI, facial recognition and spyware are poised to be a pernicious foe –- scaling up and supercharging violations of international law and human rights to exceptional levels," Amnesty's secretary general Agnes Callamard told AFP.

• Europe, for example, was criticized by Amnesty International for using the "iBorder Control" software, which acts like a lie detector during border checks.

• France, hosting the 2024 Olympics, has become the first country in the European Union to legalize the use of artificial intelligence for surveillance purposes.

Follow the money: AI has become the new superweapon for global power as the G7 (Canada, France, Germany, Italy, Japan, the U.K., the U.S. and unofficially the E.U.) looks to control BRICS (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the U.A.E) access to the technology.

• The U.S. government has called on allies to force computer chip companies to stop maintaining some of the tools they have sold in China, part of Washington's efforts to undermine China's ability to produce its advanced computer chips.

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