Jack Ryan: Shadow Recruit (2014)
Compliance Officer Identifies Unusual Trade Activity of an Important Client from a High-Risk Country Indicating a Possible Terror Plot
Jack Ryan: Shadow Recruit, the post- 9/11 espionage thriller that updated the focus of Jack Ryan to thwarting terrorist plots on US soil steeped in manipulating global financial markets. Post-Afghanistan battlefield injured-Marine, Jack Ryan (Chris Pine), encounters William Harper (Kevin Costner) while in recovery at a Washington D.C. hospital. Harper is impressed with Ryan based on his military background and seeks to recruit him to the Central Intelligence Agency (CIA) by offering him a cozy desk job as a covert analyst at Wall Street private banks to track terror groups.
To execute, Jack needs a role that provides him access to enterprise-wide client and financial data to identify and detect unusual activities indicative of terrorist financing. Enter the most over-educated compliance officer in finance: Jack Ryan, PhD of Harrman Brothers (Harrman), a Wall Street investment bank.
As a matter of best practice to manage a risk-based compliance program of a financial institution, a compliance officer needs to maintain an awareness of geopolitical events that may impact the financial institution and its customer base. While Jack is serving as the covert compliance officer at Harrman, political gamesmanship is afoot between the United Nations (UN), US, Russia, and Turkey. Namely, Russia opposes the development of a pipeline across Turkey because it would impact Russia’s dominance on oil exports, a key economic engine for the nation.
At the UN, a US representative informs a Russian representative that the US denied Russia’s proposal to block the pipeline. The Russian countered that this matter is now an economic war due to the foreseeable negative impact on Russian oil exports. Back at Harrman, Jack is aware of the television commentary covering the pipeline saga and its impact on global currency prices. While keeping up to date on the markets, Jack is reviewing the trading activity of a firm client, Cherevin, owned by Viktor Cherevin (Kenneth Branagh), a Russian oligarch, on a compliance officer/analyst’s favorite technical friend: an Excel spreadsheet. As Jack seeks to gather additional information supporting the trades, his access to the files is denied.
To push forward on some suspicions, Jack seeks to meet covertly with Harper at a movie theater showing, Sorry, Wrong Number. At the theater, Jack passes across a file to a CIA colleague on Cherevin and says they need to visit Russia. The colleague informs Jack that no one understands the financial data and he needs to find a way to Russia to investigate further. Enter the most unassuming way a compliance officer can learn about a high-risk client: The site visit or audit.
However, Jack needs to convince his boss at Harrman, Rob Behringer (Colm Feore), to visit Cherevin Group in Moscow due to unnamed accounts, uncategorized transaction spread all over the world with Cherevin Group and Khorobask Holdings in Russia. Rob asks Jack how he found the transactions, to which Jack replies, “you pay me to look,” with Rob countering, “not to look that hard.” Rob takes the business approach and questions Jack on whether Cherevin is stealing from Harrman. He also defers to Jack as the compliance officer with a kind reminder to not screw up Harrman’s most lucrative partnership “Don’t rock the boat, it’s a luxury yacht and we are all on it together, so don’t sink us.”
Separately, the pipeline issue heats up and Russia moves towards a coordinated attack on the US led by Cherevin’s son. Cherevin met with Russian Interior Minister, Sergey Sorokin (Mikhail Baryshnikov), and Cherevin confirmed he started to move financial assets based on the UN vote to undermine the US economy. Critically, Sorokin makes it clear to Cherevin that the Kremlin must be distanced from Cherevin’s financial market moves.
Post 9/11, under the USA PATRIOT Act of 2001, the US introduced significant legislation to protect the US financial system by enhancing compliance, reporting, information sharing, and due diligence requirements, among others, of domestic and foreign financial institutions. Moreover, the Act included specific requirements for private banking accounts and politically exposed persons (under the Act known as senior foreign political officials).
Under the Section 312 of the USA PATRIOT Act, private banking account is an account that is established or maintained for the benefit of one or more non-U.S. persons, requires a minimum aggregate deposit of funds or other assets of not less than $1,000,000, and is assigned to a bank employee who is a liaison between the financial institution and the non-U.S. person. If an account otherwise satisfies the definition of a private banking account, but the financial institution does not require a minimum balance of $1,000,000, then the account does not qualify as a private banking account.
While the Financial Action Task Force (FATF) under Recommendation 12 considers a politically exposed person (PEP) an individual who is or has been entrusted with a prominent public function, whether domestic or foreign, the US does not maintain a broad-based PEP law. Rather, under Section 312 of the USA PATRIOT Act, a senior foreign political figure is considered a current or former senior official in the executive, legislative, administrative, military, or judicial branches of a foreign government, whether or not they are or were elected officials; a senior official of a major foreign political party; and a senior executive of a foreign government-owned commercial enterprise. This definition also includes a corporation, business, or other entity formed by or for the benefit of such an individual. Senior executives are individuals with substantial authority over policy, operations, or the use of government-owned resources. Moreover, a senior foreign political figure includes immediate family members of such individuals, and those who are widely and publicly known (or actually known) close associates of a senior foreign political figure.
Interestingly, allegedly unbeknownst to Harrman until Jack Ryan looks, Cherevin operates as an extension of the Russian government, which would include Section 312 requirements. Back in the US, Jack’s girlfriend, Cathy Muller (Keira Knightley), discovers he went to see Sorry, Wrong Number without her as they previously discussed going together over dinner. When questioned about who he went to the movie with while insinuating an affair, Jack responded by himself, “he’s a compliance officer and does everything by himself.”
Jack heads off to Russia and is picked up at the airport by Cherevin’s driver. Unfortunately for Jack, the driver is sent by Cherevin to kill him with Jack relying on his military training to defeat the attack. Jack connects with CIA operations stating he is just an analyst and needs help. Jack is reminded he is actually a Marine and needs to meet with Harper in Staraya Square, which is adjacent to the Russian Presidential Administration building.
At the meeting with Harper, Jack reveals Cherevin’s plans as he noticed a series of undisclosed Cherevin accounts at Harrman with massive currency positions in US treasuries, indicative of Cherevin making a total commitment to the US dollar when the US experienced a number of natural events, which is known as external sterilized intervention, i.e. the US dollar should go down based on the events, however, it crept up, a few cents each day. Jack believes Cherevin is propping up Wall Street in a Russian government-sponsored coordinated plot to collapse the US dollar and crash the US economy with a follow-on terrorist attack on US soil. Russia intends massive US dollar sales prompting the rest of the world to dump the same. The key is Russia will recover from the market crash because they have the oil reserves, whereas the US does not, which will result in the Second Great Depression.
Jack surmises that the massive trades must be pre-programmed in advance to ensure coordination across the markets and are most likely stored in Cherevin’s systems. Jack believes the audit can be used to understand the date and time of the attack down to the minute with Harper agreeing to proceed with the audit. Jack tells Harper that he sold him on an office job, Harper hands Jack a firearm and reminds him he is no longer an analyst, he’s operational.
Jack proceeds to Cherevin’s Moscow office to conduct the routine audit, then off to dinner with Cherevin as cover to undermine the pre-programmed market sell, which results in Cathy getting kidnapped as leverage by Cherevin, and the terrorist sleeper cell is activated in the US to coordinate the ground attack. In the end, no-longer-a-compliance-officer operational Jack thwarts the terrorist attack in New York.
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RISK | STRATEGY | CYBER COMPLIANCE MANAGEMENT
