The Arkin Group

September 24, 2021

The internet was supposed to be borderless, but national leaders are wielding control over tech companies via local employee requirements. National leaders frustrated with the power of big tech gained a victory this week when Apple and Google capitulated to Russia’s orders and removed an election app created by imprisoned Russian opposition leader Aleksei Navalny just before the onset of Russia’s parliamentary elections. The tech companies reportedly stood their ground, but Russia threatened criminal charges against local Google employees, naming specific individuals who would face prosecution if the companies didn’t comply and remove the app. Countries like Russia and India have recently used their market power to require that tech companies maintain local offices where employees are physically vulnerable to state-level enforcement. In May, Indian police officials raided two local Twitter offices and demanded to know why certain government-issued Tweets had been categorized as “manipulated media.” In July, Putin signed a new law requiring that any social media company with more than 500,000 Russian visitors a day must open physical offices in Russia or else they’d be subject to advertising bans and penalties. Although some countries might be hesitant to make demands on a giant like Google, Russia has developed viable, competing domestic social media platforms and search engines, and is better positioned than most to handle a fallout with Silicon Valley.

World Bank discontinues high profile Doing Business report, rocks credibility of global rating systems. Last week the World Bank announced that it will discontinue its annual Doing Business report after a series of reviews and independent audits revealed that bank leaders pressured staffers to manipulate data and boost the ratings of China and Saudi Arabia in the 2018 and 2020 reports. Launched in 2003, the Doing Business report was part of the World Bank’s effort to remain relevant during the period when major developing countries like India and Brazil were becoming richer and could shop around for private, alternate funding. The report, which has not been without controversy, became a critical global ranking system and national leaders strived to be in the top 20. Members of the World Bank leadership were subsequently under political pressure to cook the books, and there apparently weren’t enough safeguards in place to preserve data integrity. While the recent scandal will impact the direction of the Bank, it will also have ramifications for other global rating initiatives that claim objectivity. As such, it will be more critical than ever for corporations and investors to seek diverse intelligence inputs to understand the true conditions on the ground and make the best decisions on how to proceed.

In attempt to curb ransomware activity, US Treasury issues first sanctions against cryptocurrency exchange. On Tuesday, the White House imposed sanctions against virtual cryptocurrency exchange Suex for its role in facilitating cryptocurrency payments to ransomware attackers. The designation marks the first time that the Treasury Department’s Office of Foreign Assets Controls (OFAC) has sanctioned a virtual cryptocurrency exchange for complicity in ransomware crimes. OFAC is adding Suex to its list of specifically designated nationals (SDNs), a category usually reserved for serious narcotics traffickers or terrorists, and it’s now illegal for US residents or citizens to conduct business with the exchange. Media reports indicate that Suex executives are likely Russian and Czech, but that the exchange operates out of Russia. According to an analysis by the US Treasury Department, over 40% of Suex transactions were associated with illicit actors, and blockchain analytics company Chainalysis identified about $13 million in bitcoin transactions sent through Suex directly tied to ransomware attacks. The Suex sanctions will serve as one component of many needed to curb the uptick of ransomware attacks that continue to disrupt critical supply chains.

The San Diego World Affairs Council presents the “Distinguished Speaker” Series featuring Jack Devine & Jonathan Ward, Ph.D.

Jack Devine and Jonathan Ward on Russia and China

September 17, 2021

Image credit: Creative Commons, www. kremlin.ru via Wikimedia commons

In a recent Bloomberg radio podcast, Barry Ritholtz and I discuss the spy business and a wide range of geopolitical issues, focusing heavily on Russia’s ongoing political strategy that includes global cyber and economic influence campaigns. Russia will work to incite or prevent instability in a region depending on its interests, and in the Bloomberg interview I share some opinions on how Putin operates and why. In this week’s In Other News, I further explore how Russia, and in this case also China, meddles in the politics of other nations in a way that doesn’t always end favorably for those involved.

Recent coup d’état in Guinea could challenge Russian and Chinese economic interests. China and Russia have been competing for the exploitation of Guinea’s rich mineral reserves that include iron ore and bauxite, used to produce aluminum, but economic ventures in West Africa remain vulnerable to political instability and the recent coup in Guinea marks the third such takeover in the past six months, following similar events in Mali and Chad. On September 5, Guinean President Alpha Condé, who’s received Russian support since he assumed power in 2010, was toppled in a coup d’état fronted by the young, charismatic Colonel Mamady Doumbouya. Condé had outraged the general populace when in 2019 he changed the Constitution so that he could continue to lead for a third term in 2020, but both the Chinese and Russians supported his extended rule. Russia has a longstanding economic and trade relationship with Guinea dating back to the Soviet era and has been substantially invested in bauxite mining operations and arms sales with Conakry, with the welcome side effect of challenging key western actors in the process. The Chinese, too, have trade deals with Guinea that date back 50 years, and in return Guinea has supported measures like China’s Hong Kong national security law.

The recent coup, which temporarily shook the global aluminum market and caused prices of the metal to jump to a 10-year high, could affect Chinese and Russian local mining operations if the new leadership seeks to intervene in current practices. And given the coup’s potentially negative impact on China and Russia, the United States has subsequently been accused of assisting Doumbouya, especially since US Special Forces were actively training the Guinean military to bolster its counterterrorism efforts at the time of the takeover. But the United States denies any involvement and the political upheaval in Guinea is part of broader regional frustration with ruling elites who consistently prioritize their own advancement over that of their people. Although the United States, like China and Russia, has denounced the coup, and the Economic Community of West African States (ECOWAS) appears to be taking a hard stance by sanctioning coup leaders and demanding civilian elections in six months, Doumbouya has likely been watching the success of nearby takeovers and recognizes that punitive measures are generally lifted quickly. While some Guineans are presently celebrating Condé’s demise, the new Guinean leadership will prove an exception if it promotes human rights or institutes positive social change any better than its predecessor in the long run.

As Chilean elections approach, the issue of Chinese foreign investments could be divisive. Chile was the first country in South America to establish diplomatic relations with the PRC in 1970, and the well-established relationship between Chile and China was further bolstered in 2005 with the signing of a free trade agreement. But China wasn’t making a significant investment in Chile until about five years ago when former Chilean President Michelle Bachelet made a substantial push for Chinese funding. The effort has proven successful, and according to InvestChile, a government agency focused on foreign investment in Chile, Chinese firms weathered the pandemic and are embarking on several new Chilean projects with an increasing focus on infrastructure investment. Further, Chinese firm Sinovac recently announced plans to invest $60m in Chile via the construction of a research and development center along with a vaccine manufacturing plant. But some Chilean politicians have stated that Chinese investments need to be viewed through the lens of national security, and others have questioned if recent purchases of major Chilean electricity companies could threaten the nation’s authority over the industry. Chile’s relationship with China has historically been supported by both the right and the left, but it’s possible that as the Chilean presidential elections approach in November, the issue of regulation on foreign investment could become more contentious.

Bloomberg Opinion columnist Barry Ritholtz speaks with Jack Devine, a 32-year veteran of the Central Intelligence Agency and the founding partner and president of the international risk consulting firm The Arkin Group. Devine is also the author of “Spymaster’s Prism: The Fight Against Russian Aggression” and “Good Hunting: An American Spymaster’s Story.”

Jack Devine on the Afghan War’s Financial Disaster

September 10, 2021

Terrorism after 9/11 and the potential impact of the Taliban’s reemergence.

Many of us can still remember where we were twenty years ago on September 11, scrambling to contact and locate loved ones as we watched the Twin Towers transform into smoky, foreboding chimneys rapidly approaching collapse. The attacks were highly personal, not only for those who tragically lost family members or friends that day but for anyone who cherished the value of freedom. Thousands of lives were taken on 9/11, and thousands more in the subsequent weeks and years as our nation retaliated against myriad terrorist threats ranging from al-Qaeda attacks on US interests to the advent of ISIS and its attempted caliphate.

Over the past two decades the threat of terrorism has evolved and shifted but it has never disappeared. Terrorist groups continue to exploit local grievances to assert regional control, strengthening their presence in parts of South Asia, the Middle East and Africa. Even where groups don’t have a physical foothold, they can claim an ideological one and in the years since 9/11 the internet has significantly disrupted the way that terrorist groups recruit, organize and operate. The recent attack on Karzai airport in Afghanistan, attributed to regional ISIS affiliate ISIS-K, demonstrates the resilience of a diffuse movement whose members are motivated by shared ideology.

Indeed, in Afghanistan, groups like ISIS-K and most notably the Taliban itself, have been able to maintain or develop a certain degree of power despite years of foreign military intervention. It can be debated whether a continued US presence would have contained these violent elements, and for how long and at what cost, but as it stands now the Taliban has gained control and it’s going to try to keep it. The Taliban is presently focused on establishing itself as a legitimate governing entity with firm command over the Afghan people and an eye towards acquiring regional power.

But as part of this effort the Taliban will need to figure out how to use its connections to al-Qaeda and Pakistan to thwart rivals like ISIS-K, potentially expanding its reach into, and further destabilizing, South Asia in the process. While it remains to be seen how much the Taliban and al-Qaeda will ultimately unite to support each other’s regional power grab, the Taliban likely recognizes that any attack on the United States cultivated on Afghan soil would come at an extremely high cost‒ resulting in a rapid US military response, and again weakening the ambitions of both groups in the process.

UAE establishing specialized court for money laundering as part of larger effort to strengthen nation’s standing as an international financial center. Over the past several years the UAE has been making a concerted effort to enhance its anti-money laundering (AML) regime and its progress was recognized in the latest Financial Action Task Force (FATF) assessment that lauded many of the nation’s improvements. But given the stature of the UAE as a major business and financial hub dealing with a large volume of diverse, high-risk inputs, the number of annual money laundering prosecutions nationwide hasn’t lined up with the degree and type of activity. Recognizing this disparity, in late August, the government of Dubai announced the establishment of a new court within the Court of First Instance and the Court of Appeal that will be focused on prosecuting money laundering offenses, further building out the UAE’s efforts to prevent financial crime after the Executive Office of AML and Countering the Financing of Terrorism (CFT) was approved by the cabinet in April. Abu Dhabi established a similar court last fall which has already been instrumental in prosecuting financial crimes that often require specialized expertise. While the UAE’s AML/CFT efforts are increasingly important and commendable, the success of the courts will still depend on inputs from financial institutions, regulators, and invested citizens who must all play a role in identifying criminal activity and alerting authorities to the illicit behavior.