From flows towards updates: Security regimes and changing technologies for financial surveillance

Abstract

‘Follow the money’ is currently the central principle of international financial security, although money itself is probably one of the most unlikely objects to make traceable. Two recent scandals around a security unit and the payment processor Wirecard show how existing systems of financial surveillance that seek to capture ‘flows’ of money for security purposes are either enabled or frustrated. While this current regime of financial surveillance adheres to demanding the free flow of money through financial infrastructures and various actors and intermediaries, new digital currencies build on a set type of ledger(s) in which money is stored as data. Hence, what we understand as money does not ‘flow’, but is rather updated. This change in the underlying infrastructure means that traceability does not need to be enacted; it is an intrinsic feature of digital currencies. With new central bank digital currencies (CBDC), the regime of financial security thus changes from the monitoring of financial flows and flagging of (potentially) illicit transactions towards the storage of financial data in (de)centralised ledgers. This form of transactional governance is engendered by shifting geopolitical agendas that increasingly rely on fractured instead of globalised financial infrastructures, thus making CBDCs themselves subject to security efforts.

Increasing State Capacity through Central Bank Digital Currencies. A comparative account of the digital yuan and digital ruble.

“…As has become apparent, American political and economic hegemony is to some extend sedimented in financial infrastructures which function as intelligence providers in the American global war against terrorism and represent the sine qua non to implement Western economic sanctions. (de Goede, 2012; de Goede and Westermeier, 2022;Mulder, 2022) In Russia, the possibility that Western powers might use their hegemony in financial infrastructures for foreign policy aims has been a particularly powerful instigator of policy change over the 2010s (e.g. Ehlke, 2024).…”

“…As a result of these battles global financial infrastructures themselves are altered. The contemporary financial system emerged in the post-Bretton Woods era, during which the United States and other Western countries promoted an international system that facilitated financial globalization without establishing global infrastructures (de Goede and Westermeier, 2022). Financial networks, including SWIFT, Visa, and Mastercard, are increasingly viewed as geopolitical players rather than simply service providers.…”

“…They have the potential to facilitate international transactions that no longer rely on the use of the US dollar and therefore on clearing institutions under US jurisdiction. This way they can become an instrument to possibly evade the reach of Western, and especially US, sanctions, and to shield domestic and cross-border transactions from foreign interference (Westermeier, 2022). In this sense, CBDCs are defensive tools of financial statecraft that widen the possible scope of action in the pursuit of foreign policy goals (Armijo and Katada, 2015).…”

The money tree: Exploring central bank digital currency blockchain imaginaries

“…This entails believing in the superiority of technocratic and market mechanisms over political reasoning and aspirations. In this epistemology, the BIS can be understood as a centre that enables international co-operation and leaves political disputes aside (Westermeier 2018).…”

“…Based in Basel, Switzerland, the BIS was historically developed as the bank of central banks. Its influence within the central banking sphere has increased significantly following the 2008 financial crisis, going well beyond banking services (Westermeier 2018). It has been criticized as secretive and opaque, a form of 'club-model governance' that uses self-selection mechanisms to enable power replication (Tsingou 2014).…”