In Other News – World Bank Discontinues Doing Business Report & More – 9/24/21

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.