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Credit Where It’s Due

Part of the problem with the news today is that nearly everything in the world is interconnected. Stories have a tendency to bleed into each other for a variety of reasons, such as their equal usefulness as political tools or because the actors are involved in many different things at once. A good conspiracy theorist can link two stories together in ways that they probably shouldn’t be.

This may be one of those moments. Caveat Lector, let the reader beware.

There is little doubt that the theft of credit cards from Target last Winter could be traced to Ukraine – and, in so doing, the network of organized crime we might call the “Russian Mafia”. It is more accurate to refer to them by their own name for themselves, Bratva (Ukrainian for “Brotherhood”) because they are an international syndicate based in Russia, Belarus, and Ukraine and operating nearly everywhere.

An estimate of their take from credit card fraud puts into perspective the scale of the problem in Ukraine,  We can estimate the resources they have as well as the stake they are fighting for as they resist the introduction of order and the rule of law. It also points to the US role in Ukraine – which is to say without sending in troops.

The whole system has to be regarded as insecure at this point.

The whole system has to be regarded as insecure at this point.

Credit card fraud was an $11.3B industry worldwide in 2012. Nearly half of it occurring in the US, which reflects how commonly they are used here more than anything. About half of the tab for it is borne by consumers, the rest by card issuers and a small amount by merchants.

Of that fraud, we can make a guess as to how much is controlled by the Bratva. I am going to go out on a limb and claim that it is about half of the total amount, based largely on the sophistication of their operations. That takes some explanation.

Some people have been caught using cards known to be stolen from Target, which is important. We can trace that theft directly to Odessa, Ukraine, so we can be sure that some Bratva faction was involved in the operation. The people that were caught in Texas had only cards information that belonged to Texans, meaning that the information had been sold off by the larger syndicate to small-time hoodlums. “They’re obviously selling the data sets by region,” said the police chief in McAllen.

Recall that phone numbers were stolen along with credit card numbers. That makes assignment to a region much easier when they are being sold off in bulk.

The Bratva still uses  the communist images

The Bratva still uses the communist images

This is why I believe that the Bratva may be involved in as much as half of the credit card theft. Their operation is not only very sophisticated, but it is very hard to trace back. They clearly had a system in place to efficiently handle the parceling and sale of up to 110M users’ worth of data. Most of the fraud occurs in small tranches at gas stations, bars, and the like.

If the Bratva is responsible for up to $5B worth of credit card fraud, we have to figure out what their take is for the number that they are selling in bulk to the small-time hoods. Since the Bratva is not taking any of the risk as the fraud is committed, they are probably not getting most of the benefit. Let’s say that they only take a 10% vig when they sell them, meaning that for the roughly $130 average fraud per consumer they are charging their regional operatives about $13 per card in bulk.

That means that the Bratva is pulling in something on the order of $500M per year off of their credit card operations alone. That’s about 0.3% of Ukraine’s GDP.  It may be much higher.

You can see from the size of that number that there is a lot of motivation to resist the encroachment of snoopy European Union types bent on restoring order. They also have a lot of resources to resist, too.

This says nothing about their income from trafficking in women as sex slaves, which may be as lucrative – but we can’t tell. Nor does it include securities fraud or other cybercrime. We also can’t tell just what part of this is based in Ukraine specifically, telling us the value of keeping Ukraine on a short leash or at least destabilized. But it gives us a rough guess as to what’s involved here.

Let's keep this War on Whatever more focused, please

Let’s keep this War on Whatever more focused, please

This points to the best possible role for the US, which is to declare a “War on Organized Crime” akin to the War on Terror. Think that was a huge waste? You’re wrong – it worked well in areas that show why an FBI led operation against organized crime might be very successful.

Yes, al Qaeda still exists, even if its operations are reduced. But Gadaffi was separated from terror organizations and ultimately deposed – and he was a major supplier of arms to the Irish Republican Army (IRA), which has largely disarmed. The FARC in Colombia and ETA in Spain were isolated and dramatically curtailed. The War on Terror was successful where it operated in the developed world – which is where the money comes from that sustains international organized crime.

In addition, a sustained effort against the money launderers that can make money disappear in Miami and then pop up somewhere else would have side benefits in curtailing pirate banking and tax dodges around the world. There are many reasons to support this effort.

Is all this a grand conspiracy theory? I don’t think so, but you can call it what you want. We know a little bit about where the Bratva gets their money, and some portion of that is used to torment the people of Ukraine and fuel the chaos that has unfolded. We should act against it no matter what because the tab is large and costly to us – but it would also benefit Ukraine to put a stop to it, at least in the long run.

16 thoughts on “Credit Where It’s Due

  1. The US should send troops to Ukraine to defend Ukraine as a nation.

    Ukraine is a legal and legitimate nation recognized by the United Nations.

    • If it did come to that, what would stop the nukes from flying? Or the war from spreading to Belarus and so on? That’s the problem with Ukraine – it’s not at all an isolated problem. As much as there is a Westphalian obligation to preserve the sanctity of a “nation state”, there is also a tremendous amount of peril in this one. Russians still call it “The Ukraine”, not “Ukraine” – which is to say “The Border Region”.

  2. Ukraine and the European Union were working on the Deep and Comprehensive Free Trade Agrerement.

    If Putin had a problem with that he should have discussed this matter with Merkel in a timely matter The alternative would have been to take up the matter in the Security Council of the United Nations, if a European – Ukraine partnership violates some principle of human rights.

    Merkel issued this statement on Ukraine on November 19, 2013


    To have miscalculated the politics of the Ukranian is a major error on the part of the EU.

    I will try to see if the State Department had any useful advice to Merkel prior to the protests in Ukraine of last year.

    • This I can agree with completely. You are looking at the genesis of this problem, which clearly is at least as much about the establishment of the rule of law as it is free trade. The problem was that the EU didn’t pony up $15B when that was the cost of Ukrainian friendship, but Russia did. Now, the tab is $17-32, depending on how you count.
      But this is all about the politics of criminal gangs and/or how to defeat them. It’s more than “corruption” as we typically understand it in the developed world – this is a systemic and deep problem. And the EU utterly failed in every way.
      I have also been looking for anything that describes the US role prior to November. If you come up with anything, please share. I don’t think we had anything of significance going on (despite what Russian and/or leftist propaganda constantly claims) but I could be wrong. I simply have yet to see evidence that we played any significant role.
      But the EU definitely had no idea what they were getting into, that is clear.

  3. I see this as a european problem. If we can do something to help maybe we should. Be careful what you wish for however. A war on crime would probably mean more intrusion by the NSA in the guise of protecting us from criminals.

    • Good point – if we do conduct a war on crime we have to be sure it isn’t hijacked by the usual suspects. My gut tels me that while the NSA, et al, don’t actually plan events that lead to their gaining more power they are always prepared to expand their power at any opportunity. Kind of a Reichstag Fire theory.

  4. My understanding that the EU was asking Ukraine to release Yulia Tymoshenko and reform its electoral laws as final steps before agreeing to sign the trade and cooperation pact.

    I’ll look again but I dont think this was a cut and dried matter of the EU not wanting to give financial aid to Ukraine.

    If Ukraine had defaulted on bonds, that is nothing new. That happens to countries now and then and then countries step in to help. No reason to go back to Russia.

    The EU was trying to help Ukraine. They are working on things with Moldova, Belarus, Armenia, Azerbaijan, and Georgia.

    In 1994 the US and Russia pressured Ukraine to give up its nukes in return for territorial integrity. Both the US and Russia insult Ukraine by not living up to a treaty. The treaty just was words on paper.

    If Ukraine should ask for help from NATO, NATO should help. That is what NATO is for. It is to combat expansionist Russian foreign policy.

    Russia is sore about losing the cold war. We told them not to go communist in 1917. We asked Stalin not ally with Hitler. After WW II, Stalin had nothing useful ideas on Germany. All he wanted to do is choke Berlin. Force Berlin into submission.

    Well Berlin was the thing that made the Cold War come crumbling down. That way the nations of Eastern Europe could chart their own destiny. The Eastern Europeans knew what was going on. They listened to the Voice of America.

  5. I don’t know how much truth there is in this, but at the time Ukraine’s Finance Minister blamed the inability to secure favorable terms with the IMF as the reason for the turnaround on the Deep and Comprehensive Free Trade Agreement:

    Take from this what you will, but it seems as reasonable as anything.

    The EU was and is definitely, without question, trying to help Ukraine become a modern, democratic nation. It s very much in their interest for that to happen. There have been many allegations that the US was behind the current largely illegitimate regime from the very beginning, and these are often repeated by the US left. I have yet to see any substantial evidence to back this.

    I was not aware that we have made promises to Ukraine. I looked this up:

    You win this one. A promise is a promise. Damn.

    This is an issue that is well worked out socially, arguments between us. I certainly don’t know everything on this topic.

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