UK’s Russia Report: Cyber-Threats on the Rise?

UK’s Russia Report: Cyber-Threats on the Rise?

The culmination of a significant degree of intellectual and technological resource allocation, a long-awaited report published by British intelligence recently revealed startling discoveries pertaining to Russian influence in the British political and financial sectors. The United Kingdom’s Intelligence and Security Committee of Parliament (ISC), an agency that oversees the greater UK counter-intelligence community, has found that the national government and many of its independent intelligence agencies failed to adequately investigate Russian interference with respect to the 2016 Brexit referendum. This conclusion, laid out in an extensive 50-page report, identifies potential shortcomings in the oversight of multiple industries, leading to the UK developing into arguably the “top Western intelligence target” for the Russians ahead of the vast majority of North Atlantic Treaty Organization (NATO) member states.

The report notes that the Her Majesty’s Government has maintained that they had neither seen nor sought evidence of successful Russian interference in UK democratic processes. The committee makes it clear that government officials had little interest in looking for Russian interference in their political system, despite the presence of credible open source commentary available suggesting influence/disinformation campaigns originating from Russia in similar political referendum periods of recent memory (i.e. the Scottish independence referendum from the UK in 2014). It appears that the UK has effectively chosen to turn a blind-eye to the highly-probable illicit activities that occurred (which may have continued to date), essentially taking the exact opposite approach to that employed by the United States in handling their respective case of alleged Russian political interference during the 2016 election. The main difference between these two cases was the fact that this novel report strictly highlighted the fact an investigation into potential misconduct was not carried out by the UK government. As such, the report falls short in making direct claims into whether or not any Russian interference actually occurred; nor does it supply any tangible evidence as to why there should have been an investigation. The UK government’s response to said report doubled down on the fact that they saw little evidence of Kremlin interference in the EU referendum, adding that with British intelligence agencies making regular assessments of potential Russian threats, such an inquiry was ultimately deemed unnecessary. Nevertheless, the report notes that such a follow-up assessment would have gone a long way to reassure the general public that the country’s democratic processes had/have remained safe.4

Regardless of the lack of action taken by the UK government in this regard, it is difficult to deny the growing risks posed by the Russian government to the health of the UK electoral process, its greater financial system and beyond. With Russia continuing to develop into a significant player in the cyber-realm, historically engaging in malicious cyber activities across a number of economic spheres, the report notes that the UK’s Critical National Infrastructure (CNI) is on the radar for Russian cyber-intrusion. The United Kingdom’s Government Communications Headquarters (GCHQ), one of the country’s prime intelligence, security and counter-terrorism organizations, had previously advised the federal government of the General Staff of the Russian Armed Forces role in the use of sophisticated phishing exploits against British government departments in the recent past, while also touching on the growing intertwinement of organized crime with the Russian government for purposes of supplementing the latter’s illicit cyber-capabilities.4 The significant amount of attention paid to Russia’s growing cyber-repertoire shows just how grave a threat these activities may be to the UK’s national security interests moving forward.

Thus far the lone response from the Kremlin has been the country’s Foreign Ministry calling the report just another case of “Russophobia” brought about by its western counterparts. However, it is difficult to argue against this stance when there has been no evidence provided to prove the validity of any claims of wrongdoing. Altogether, the report has widely been viewed as a lengthy expression of frustration that the British government has not leaned harder on Russia. Unfortunately however, no evidence is provided to show us why exactly the UK government should be doing so. While the Russia report may be filled with more political filler than actual investigative substance, time will tell if Russia’s continued impingement upon the political and economic activities of its high-powered neighbors leads to an escalation of probes and subsequent actions against them in the months to come.

You can read the ISC’s Russia Report in its entirety here.


Weekly Roundup


OCC: U.S. Banks Can Hold Crypto-Assets

 The Office of the Comptroller of the Currency (OCC), a federal agency tasked with supervising federally licensed banks and branches of foreign institutions operating within the United States, recently ruled that national lenders can now provide custody and safekeeping services for crypto-currencies. The new policy, revealed in a letter published by the OCC last Wednesday, helps in part to clear up much of the regulatory uncertainty surrounding the governance of digital currency by American financial institutions. The statement ultimately ruled that the banks ability to carry digital coins and the private cryptographic keys associated with them on behalf of their customers constitutes a modernized and increasingly necessary form of traditional banking, which should be allowed moving forward. In the letter, Jonathan Gould, senior deputy comptroller and chief counsel, writes, “The OCC recognizes that, as the financial markets become increasingly technological, there will likely be increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers.”1 He continues, noting that “by providing such services, banks can continue to fulfill the financial intermediation function they have historically played in providing payment, loan and deposit services.”1

The one caveat named as part of the novel declaration is that any institution that chooses to provide these custodial services for crypto-assets must in turn adopt/practice the appropriate risk management procedures needed to uphold adequate financial security for itself and its customer(s). As such, it is recommended that the institutions discuss their plans on this matter with regulators before choosing to practice. The letter in its entirety can be found here.


SEC Slaps Multi-Million Dollar Fine on Swiss Firm UBS

 Swiss multinational investment bank and financial services firm UBS Group AG has agreed to pay approximately $10 million in fines to the United States Securities and Exchange Commission (SEC) to resolve claims that the group circumvented the priority given to retail investors in various municipal bond offerings. A press release from the government agency reads “over a four-year period, UBS improperly allocated bonds intended for retail customers to parties known in the industry as ‘flippers,’ who then immediately resold or ‘flipped’ the bonds to other broker-dealers at a profit.”3 The SEC’s charges claim that UBS either was aware or should have been aware that these so-called flippers were not eligible for retail priorities in this regard. In total, the SEC found that between 2012 and 2016, UBS representatives facilitated thousands of trades with flippers in an effort to secure a higher priority in the bond allocation process, allowing it to acquire bonds for its own inventory.3 UBS ultimately agreed to a cease-and-desist order that it violated several provisions of the Municipal Securities Rulemaking Board Rules, while neither admitting nor denying the SEC’s findings. The breakdown of the fine reportedly includes a $1.75 million penalty, $6.74 million in disgorgement of unethical gains made via the ploy, and over $1.5+ million prejudgment interest.

As part of the restitution process, the SEC also announced additional fines, each in excess of $40,000, against two UBS representatives involved with the submission of retail orders on behalf of the flippers. The two men have also agreed to see a one-year limitation placed on their engagement in the trading of certain securities.



Ex-Romanian Finance Minister Sentenced for Corruption

 Last week, a state court officially sentenced former Romanian finance minister Darius Valcov to serve a 6.5-year prison sentence for his role in facilitating the proliferation of unethical activities between the government and both public and private institutions. The recent charges allege that Valcov took bribes and peddled influence in awarding public works contracts throughout the European country while holding the position of mayor of the town of Slatina from 2004-2012.2 The legal issues continue to mount for Valcov, who in 2018 was sentenced to eight years in jail in as part of a separate case that stemmed from his engagement in similar transgressions during the aforementioned time period. Despite the claims, Valcov continues to maintain his innocence.

The latest sentencing comes as part of a recent spree of court cases and convictions against several Romanian lawmakers and political officials for abuse of power, fraud and bribery as part of a national anti-graft movement under President Traian Basescu. Romania, one of the European Union’s most corrupt countries, is ranked 70/180 on the global anti-corruption body Transparency International’s most recent Corruption Perception Index.



  1. Gould, Jonathan V. “Interpretive Letter #1170 | Authority of a National Bank to Provide Cryptocurrency Custody Services for Customers.” Office of the Comptroller of the Currency, 22 July 2020.
  2. Ilie, Luiza. “Romanian Court Sentences Former Finance Minister to Jail for Graft.”S. News & World Report, U.S. News & World Report, 21 July 2020.
  3. “Press Release | UBS to Pay $10 Million for Violating Rules Which Give Priority To Retail Investors in Municipal Offerings.” S. Securities and Exchange Commission, 20 July 2020.
  4. “Russia: Presented to Parliament Pursuant to Section 3 of the Justice and Security Act 2013.” Intelligence and Security Committee of Parliament, 21 July 2020.

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